Mexican Peso tumbles as US midterm anxiety meets factory slowdown
- USD/MXN surges over 1.40% to 18.84 amid US election uncertainty.
- Mexico's manufacturing PMI slips into contraction territory at 49.5.
- Strong US job openings and Factory Orders bolster Dollar demand.
The Mexican Peso (MXN) loses ground against the US Dollar (USD) on Tuesday amid ongoing developments in the US mid-term elections, with investors turning cautious as they await the results and the composition of the US Congress. The USD/MXN trades at 18.84, up by over 1.40%.
USD/MXN rebounds sharply as election uncertainty, weak Mexican manufacturing activity and solid US data pressure the Peso
Market mood is upbeat, with Wall Street poised to end the session with gains. In the FX space, the Greenback appreciates against emerging-market currencies, including the Peso.
The US Dollar Index (DXY), which measures the performance of the buck against six currencies, erased its previous losses, rising a modest 0.05% to 101.85. Tensions in the Middle East, their impact on energy prices, and the uncertain outcome of the US midterm elections are exerting pressure on the Mexican currency.
Data in Mexico showed that business activity in the manufacturing sector contracted. The S&P Global Manufacturing Purchasing Managers Index (PMI) in September contracted from 50.3 to 49.5. Companies attributed the fall in production to “cash flow difficulties, inflationary pressures, raw material shortages and subdued sales.”
The Bank of Mexico (Banxico) released its private economists' survey, in which the central bank said it expects inflation to remain within its 3% plus or minus 1% range. Additionally, analysts see the economy growing below the government’s 2% GDP forecast this and the next year, and that Banxico will hold rates unchanged through the end of 2027
In the US, the Job Openings and Labour Turnover Survey (JOLTS) for September rose from 7.19 million to 7.5 million, up 4.5% from the previous month, while Factory Orders rose from 0.3% to 1.8% MoM in September, revealed the US Census Bureau.
USD/MXN traders are watching US midterm elections. Polymarket gives Democrats a 75% chance of winning the Senate and 96% of controlling the House.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 18.8383, maintaining a bullish near-term bias as spot holds well above the triple simple moving average cluster, whose latest reading sits near 17.82 and reinforces the underlying uptrend. The pair is also comfortably above the horizontal support at 16.89, while the Relative Strength Index (14) around 65 suggests firm but not extreme bullish momentum after cooling from prior overbought conditions.
On the downside, initial support is seen at the latest close around 18.84, followed by the 50/100/200-day simple moving average area near 17.82, before a more distant structural floor at the horizontal line of 16.89. On the topside, the broader advance would face a major technical barrier at the downward resistance trend line, currently projected around 21.08.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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