Mexican Peso holds firm as Banxico minutes supports the Peso
- USD/MXN holds near 16.95 as Banxico keeps a cautious tone.
- Mexico activity improves annually, boosted by World Cup momentum.
- Solid US claims and higher yields limit Peso upside.
The Mexican Peso holds firm versus the Greenback as Banxico adopted a cautious stance regarding monetary policy, while jobs data in the US revealed that the labour market is stable. The USD/MXN pair exchanges hands at 16.95, virtually unchanged.
USD/MXN steadies as cautious Banxico signals offset solid US jobs data
Market sentiment shifted positively, despite the lack of progress in the Middle East conflict. Data from Mexico revealed that the economy would have grown a modest 0.1% in July, according to the national statistics agency, INEGI.
INEGI revealed that the Timely Indicator of Economic Activity – known in Spanish as Indicador Oportuno de la Actividad Económica (IOAE) – indicated that the economy would slow in Q3, given that the growth estimate for June is 0.2% MoM.
Annually, the Mexican economy grew 2.7% YoY in July, up from June’s 2% growth, boosted by the hosting of the World Cup.
On Friday, the Mexican economic docket will feature the release of Retail Sales, which are expected to rise from -0.6% in May to 0.1% MoM in June, while in the twelve months to June, they are projected to almost double from 1.6% to 3.1%.
Regarding the USMCA trade agreement, the Canadian Prime Minister Mark Carney and Mexico’s President Clauda Sheinbaum spoke today. They discussed the importance of renewing USMCA as soon as possible.
In the US, US Treasury yields trimmed some of Wednesday’s losses following the US Treasury Department's bond buyback, with the 30-year yield up nearly 6 basis points to 5.348%.
On the data front, jobless claims for the week ending August 15 came in better than expected at 206K, below forecasts for a 210K jump and the previous print of 212K.
Fed officials had crossed the wires, with St. Louis Fed President Alberto Musalem remaining hawkish, recommending a rate hike at the July meeting. For the September meeting, he is not pre-committed to a stance, but, given recent speeches, he remains in the hawkish camp.
San Francisco Fed's Mary Daly said rising long-term bond yields are a global issue, limiting their signal usefulness for the Fed. She doesn’t see Fed credibility at risk, noting the short end reacts to data.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 16.9568, keeping a bearish near-term tone as spot holds clearly below the cluster of the 50-, 100- and 200-day simple moving averages (SMA), grouped around 17.3454. The Moving Average Triple resistance overhead suggests the broader trend remains under pressure, while the Relative Strength Index (RSI) at 28.98 slips into oversold territory, hinting that the latest slide may be stretched even as sellers retain control beneath the dominant descending trend lines.
On the topside, initial resistance is seen at the Triple SMA cluster near 17.3454, with further barriers aligned along the shorter-term downtrend resistance line drawn from 18.1651 through the 17.3871 break area, and higher up at the longer-term descending trend line anchored at 21.0808. On the downside, momentum support is reflected by the oversold RSI reading around 28.98, which could slow the pace of losses but would need a sustained recovery above the moving averages and nearby trend-line caps to signal a more durable bullish reversal.
(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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