LowIV Macro Policy & Sovereign Debt21 October 2026, Wednesday · 15:00 TRT (UTC+3)
Mexican retail sales jump 1.2% but the peso still slips
INEGI data show retail sales rose 1.2% month on month in August, against expectations of 0.3%. Despite the strong print, the peso lost 0.85% on 21 October, weakening to 18.58 per dollar.
Data released by INEGI on 21 October show Mexican retail sales rose 1.2% month on month in August, against a forecast of 0.3%. The increase followed three consecutive monthly declines. FXStreet calls it the strongest monthly gain since May 2025, while Mexican Times describes it as the strongest since July 2024.
Annual growth was 3.3% according to Rio Times and FXStreet, and 3.2% in the seasonally adjusted series used by Mexican Times. Sources also diverge on the annual forecast: FXStreet cites 1.8%, Rio Times 2.0%. Sales via internet, catalogue and television rose 17.6% year on year according to Rio Times and 21.7% according to Mexican Times. Mexican Times says spending that slowed during the World Cup in June and July returned in August, with 14 of 22 categories growing.
Mexican Times, citing El CEO data, says the strong figures did not shield the peso. The currency lost 0.85% on 21 October to 18.58 per dollar, its weakest level since November 2025. Banxico holds its policy rate at 6.50%. On 21 October Polymarket priced a 68.5% chance of a hold at the 5 November decision and 30.1% for a 25 basis point cut. Headline inflation was 3.45% in September and core 3.75%. Data for the first half of October are due on 22 October, with headline expected at 3.6%.
Talay assessment
Bottom line
The August data show consumption emerging from its World Cup lull, but the peso is driven by the rate differential with the US rather than domestic demand. With the peso at 18.58, strong demand and 3.75% core inflation narrow Banxico's room to cut on 5 November. The most likely path is the rate holding at 6.50% for one more meeting.
Likely effects
- PesoNegativeWeeks
The peso falling to its weakest since November 2025 despite strong data shows the pressure comes from the external rate differential.
- Monetary policyUncertain1–6 months
A 1.2% monthly rebound and 3.75% core inflation weaken the hand of Banxico board members pushing for a cut.
- Digital retailPositive1–6 months
Annual growth of 17.6–21.7% in internet and catalogue sales shows spending shifting towards digital channels and durable goods.
Possibilities, ranked
- 1Banxico holds on 5 November65%
The rate stays at 6.50% and the peso fluctuates around 18.5.
Watch: First-half inflation on 22 October exceeding the 3.6% forecast
- 2Banxico cuts25%
Inflation comes in below forecast, the board cuts by 25 basis points and the peso keeps weakening.
Watch: Polymarket's cut probability rising above 30.1%
- 3Peso falls sharply10%
A hawkish Fed narrows the rate differential further and the peso approaches 19.
Watch: USD/MXN after the Fed decision on 28 October
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Retail sales (m/m)▲ +1.2%
- Retail sales (y/y)▲ +3.3%
- USD/MXN▼ 18.58