Mexican Peso hits five-month high on weak US jobs data
- Mexican Peso rallies as weak NFP crushes Fed hike expectations.
- Mexico inflation falls to six-year low after Banxico hold.
- USD/MXN rebounds from 17.09 but remains under bearish pressure.
The Mexican Peso capitalizes on a weaker US jobs report and soars versus the US Dollar as risk appetite improves and the US Dollar gets battered on speculation that the Federal Reserve might not raise rates in 2026. The USD/MXN trades at 17.18, after refreshing five-month lows at 17.09.
USD/MXN tumbles as Mexico’s inflation approaches target; Dollar falls on soft NFP
The Mexican economic docket showed that inflation eased to a six-year low, from 3.37% to 3.12% YoY in July, according to INEGI, the National Statistics Agency. Core inflation, which strips volatile items, was 3.95% YoY, exceeding forecasts of 3.94%. The report came a day after the Bank of Mexico – known as Banxico - left rates unchanged at 6.50%, while hinting that the main reference rate would remain steady for the foreseeable future.
Should inflation continue its downward trajectory, it could end 2026 below Banxico’s 3.5% forecast for headline and underlying inflation in 2026. The central bank projects that inflation will converge to its 3% goal in the last quarter of 2027.
Earlier, US Nonfarm Payrolls for July showed a 23K job loss, missing the forecast of 80K gain. May and June revisions cut 103,000 jobs, lower than before. The data support the Fed’s pause on rate hikes, but the Unemployment Rate fell from 4.2% to 4.1%.
The report weakened the Greenback. The US Dollar Index (DXY), which measures the US Dollar's strength against six other currencies, has fallen by 0.42% to 99.54.
Next week, the Mexican economic calendar will feature June Industrial Output. Across the southern border, investors are eyeing the release of inflation on the consumer and producer side, followed by jobless claims data and the University of Michigan (UoM) Consumer Sentiment.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 17.1364, extending its retreat and holding below the clustered simple moving averages (SMA) trio now aligned near 17.4061, which reinforces a bearish near-term bias. The pair has also slipped back under the more recent downward resistance trend line, whose break point at 17.4584 acts as an additional topside cap, while the Relative Strength Index (14) at 32.4 hovers just above oversold territory, hinting that selling pressure is stretched but not yet exhausted.
On the topside, initial resistance is seen at the Triple SMA around 17.4061, followed by the downward sloping trend-line reference at 17.4584, where further rallies would likely stall unless momentum improves decisively. On the downside, the current area around 17.1364 is the immediate battleground, with a deeper slide opening the way toward the earlier structural break zone near 15.6962, while the RSI’s proximity to oversold levels suggests that any move lower could eventually invite a corrective bounce rather than a sustained reversal for now.
(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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