- Mexican peso is stable despite the increase in political tensions between Mexico and the United States.
- The markets look at the Federal Reserve and the Bank of Mexico for a political orientation.
- The USD / MXN exchange rate is testing resistance to the trend line.
The Mexican Peso (MXN) remains resilient against the US dollar (USD) during the European session on Monday despite increasing tensions during the weekend between Mexican President Claudia Sheinbaum and US President Donald Trump concerning a rejected proposal to deploy American troops in Mexico.
New signs of downgrade in the US economy emerged on Monday while the overall composite bought managers (PMI) index of S&P arrived at 50.6 for April, against 53.5 in March and below the flash (51.2) estimate and market consensus (51.4). Reading, which captures activity in the manufacturing and services sectors, strengthens concerns that the American economy cools faster than expected.
The USD / MXN exchange rate negotiating at 19.617, 0.17% more from Friday's close at the time of writing the editorial time, the markets remain focused on American economic dataThe expectations of interest rates in the federal reserve and the wider risk environment for signs of the next potential catalyst that could stimulate the emerging market currency (EM) of its recent range.
During the weekend, Reuters reported that Mexican President Claudia Sheinbaum refused an offer from US President Donald Trump to allow Mexico American troops to fight drug trafficking. Speaking during a public event in Texcoco, Sheinbaum reiterated the position of Mexico on sovereignty, declaring: “We can work together, but you in your territory and us in ours.” Trump confirmed the proposal on Sunday, describing Cartel's violence a major threat and refers to drug gangs like “horrible people”.
Peso Mexican stable as geopolitical and signals from the central bank shapes USD / MXN
While the exchange highlights long -standing sensitivities between the two nations, the silent response of the Peso suggests that investors favor economic fundamentals, in particular monetary policy, on political noise.
Mexican peso remains very sensitive to changes in feeling and developments in global risks in the United States, which represents almost 80% of Mexico exports. As such, the Directorate of the USD / MXN pair is mainly shaped by divergent interest rate expectations between the American Federal Reserve (Fed) and the Bank of Mexico (Banxico), as well as wider macroeconomic signals.
This week, market attention is firmly fixed on the next Fed interest rate decision, scheduled for Wednesday, May 7. Although the Federal Open Market Committee (FOMC) should largely have the rate of federal funds at 4.25%, the emphasis is put into force for investors will be the messaging that supports the decision. More specifically, the tone of the post-reunion press conference of the president of the Fed, Jerome Powell, will be essential to shape expectations regarding the path of American interest rates in the second half.
For the USD / MXN pair, any indication that the Fed could start to mitigate the policy earlier than expected could change capital flows, reduce the yield advantage of the US dollar and provide renewed support for Mexican Peso. Conversely, a more prudent or dependent position of data can strengthen the existing conditions linked to the beach, now the pair sensitive to the progressive changes in economic data and the communication of central banks.
Daily Digest Movers: interest rates and economic prospects are essential for the USD / MXN
- According to the CME Fedwatch tool, markets are prices in a drop in the rate of 25 points in July, while signs of softening American growth increase. A dominant tone of Powell this week could weigh on the US dollar and support EM currencies like the Mexican Peso.
- Despite the pay (PNF) the largest as expected on Friday, which showed a strong job creation, stable unemployment and an increase in average hourly income, the US dollar has failed to gain traction, highlighting the prudence of the market around the moment of future tariff movements.
- Banxico should meet on May 15, following two consecutive drops in rate of 50 basins that brought the reference rate to 9.00%. With the softening and growth of inflation, the markets expect another cup, although Banxico has reported a prudent and data approach.
- The Mexican economy increased by 0.2% QOQ to T1 2025, justly avoiding a technical recession. The gains were concentrated in agriculture and mining, while manufacturing contracted and the services stagnated.
- The reintroduction of American tariffs on key Mexican exports, including vehicles and metals, has added pressure to the outside Mexico and can weigh on growth and foreign investments in the coming months.
Global uncertainties, including the slowdown in international demand, the prices of volatile raw materials and the potential changes in American commercial policy or immigration, present additional risks to the PESO and to the confidence of investors in emerging markets.
Peso stable like USD / MXN stands under the descending trend line
From a technical point of view, the USD / MXN remains in a tight consolidation range just below the simple 10 -day mobile average (SMA) at 19.5864 while the pair is struggling to free itself from a well -defined descending channel.
Fibonacci's retrace is taken from the April summit of 21.0826 at the lowest April 19.451, establishing a clear structure for a reversal or a potential continuation. The pair currently tests the reserved space of Fibonacci at 100.0% at 19.4701, which served as solid support during recent sessions.
A rupture supported below this area could expose the level of Fibonacci retracement of 61.8% of the 2024 – 2025 movement to 19.3721, opening further.
Uplining, the resistance is first seen at SMA 10 days, then at 19.6910, with a stronger resistance aligned nearly 19,8152 (78.6% FIBO retracement). A descending line of the April Pic continues to cap the attempts to recover.
Meanwhile, the relative resistance index (RSI) remains less than 40, which indicates that the bearish momentum is still in place. Although a hammer candlestick Shared on April 24, he has not yet triggered a significant optimistic monitoring, keeping the short-term bias accusedly inclined unless the pair breaks above the resistance of the descending trend lines.
Daily graphic USD / MXN
Mexican peso faq
Mexican peso (MXN) is the most exchanged currency among its peers in Latin America. Its value is largely determined by the performance of the Mexican economy, the country's central bank policy, the amount of foreign investments in the country and even the levels of funding of funds sent by Mexicans who live abroad, in particular to the United States. Geopolitical trends can also move MXN: for example, the proximity process – or the decision of certain companies to move manufacturing capacity and provide channels closer to their country of origin – is also considered a catalyst for Mexican currency, because the country is considered a key manufacturing center of the American continent. Another MXN catalyst is oil prices because Mexico is a key exporter of the goods.
The main objective of the central bank of Mexico, also known as Banxico, is to maintain inflation at low and stable levels (or near its 3%target, the median point in a strip of tolerance between 2%and 4%). To this end, the bank establishes an appropriate interest rate level. When inflation is too high, Banxico tries to tame it by increasing interest rates, which makes more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for Mexican Peso (MXN) because 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 versions are essential to assess the state of the economy and may have an impact on the assessment of Mexican Peso (MXN). A strong Mexican economy, based on strong economic growth, low unemployment and great confidence is good for MXN. Not only does it attract more foreign investments, but it can encourage the Bank of Mexico (Banxico) to increase interest rates, especially if this force meets with high inflation. However, if the economic data is low, MXN is likely to depreciate.
As an emerging market currency, Mexican Peso (MXN) tends to strive during risk periods or when investors perceive that the larger risks of the market are low and are therefore impatient to engage with investments that include a higher risk. Conversely, MXN tends to weaken in times of market turbulence or economic uncertainty because investors tend to sell higher risk assets and to flee to more stable shelters.
