Mexican Peso gives back gains as US data boosts the US Dollar


  • Mexican Peso reverses its course, weakens against the US Dollar, losing more than 0.40%
  • Mexico’s CPI for October’s first half eases as Banxico has held rates unchanged since March 2023.
  • US business activity improves, exiting contractionary territory as per S&P Global PMIs.

Mexican Peso (MXN) gave up some of its Monday’s gains against the US Dollar (USD) after data from the United States (US) boosted the Greenback (USD).Additionally, US Treasury bond yields jumped, even though there is growing consensus amongst investors that the US Federal Reserve (Fed) will keep rates unchanged once again when it meets on November 1. Therefore, the emerging market currency is on the defensive as the USD/MXN is trading at 18.22, up 0.49% on the day.

Mexico reported inflation data before Wall Street opened, with the Consumer Price Index (CPI) rate for the first half of October continuing to ease. That is welcomed news, as the Bank of Mexico (Banxico) has held rates at 11.25% since March 2023, though market players expect the first rate cut in 2024. Aside from this, data from the United States showed that business activity, as revealed by S&P Global PMIs, bounced from the contractionary territory, with most indicators expanding above the contraction/expansion 50 threshold.

Daily Digest Market Movers: Mexican Peso surrenders Monday’s gains, USD/MXN back above 18.20

  • Mexico’s National Statistics Agency INEGI reported annual headline inflation hit 4.27%, down from 4.45% at the end of September, below forecasts of 4.38%.
  • Mexico’s core inflation rate YoY was 5.54%, beneath forecasts of 5.6%.
  • US S&P Global Manufacturing PMI for October jumped to 50, exceeding forecasts of 49.5, while the Services PMI exceeded the contractionary consensus of 49.9, reaching  50.9.
  • US S&P Global Composite PMI was 51, above the prior 50.2.
  • The Overall Index of Economic Activity in Mexico grew by 0.4% in August, exceeding the estimated 0.3%, data showed on Monday.
  • Annually based, the Mexican economic activity expanded by 3.7%, smashing forecasts of 3.4%.
  • The Bank of Mexico (Banxico) held rates at 11.25% in September and revised its inflation projections from 3.50% to 3.87% for 2024, above the central bank’s 3.00% target (plus or minus 1%).

Technical Analysis: Mexican Peso loses steam as USD/MXN buyers re-enter the market

The USD/MXN is upward biased, and price action of the last couple of days could form a ‘bullish-harami’ candlestick chart pattern on the daily chart, a bullish pattern. The USD/MXN pair’s first resistance would be the October 23 high at 18.37 before buyers lift the spot price to last week’s high at 18.46, before challenging 18.48, October’s high. Once those levels are cleared, the 18.50 figure would be up for grabs. On the flip side, the USD/MXN must drop below the 18.00 psychological figure for sellers to reclaim the 200-day Simple Moving Average (SMA) at 17.73.

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.