Mexican Peso advances further as US PCE inflation misses estimates
|- The Mexican Peso picks up from lows as the US Dollar pulls following US PCE inflation data.
- The MXN bounced up on Thursday after Banxico confirmed expectations and cut interest rates by 25 bps.
- USD/MXN gives away gains and approaches the key 20.00 support area again.
The Mexican Peso (MXN) is trading on a stronger note against the US Dollar (USD) on Friday, regaining some of the ground lost following a ”hawkish cut” by the Federal Reserve (Fed) on Wednesday. The softer-than-expected US Personal Consumption Expenditures (PCE) Prices index figures in the US have added selling pressure on the US Dollar.
The Peso bounced up from two-week lows on Thursday after the Bank of Mexico (Banxico) confirmed investors’ expectations and cut rates by 25 basis points (bps) to close the year at 10%.
The central bank’s statement warned about the negative impact of higher tariffs in the US and observes that the labour market loosened. Inflation has cooled and is expected to continue that way, which will allow the bank to ease its monetary policy further next year.
Today, the focus is on the US Personal Consumption Expenditures (PCE) Prices Index, which is expected to confirm that inflation remains sticky at levels above the Fed’s 2% rate. An upside surprise today would cast further doubt on the Fed’s easing cycle and provide additional support for the US Dollar.
A mild US Dollar pullback is providing support to the MXN
- US inflation measured by the PCE Prices index ticked up 0.1% in November, against expectations of a 0.2% increment. The yearly rate accelerated to a 2.4% pace from the previous month's 2.3%, below the 2.5% anticipated by the market consensus.
- The Core PCE, more relevant in terms of monetary policy expectations, slowed down to 0.1% from 0.3% in October, beyond the 0.2% expected. The yearly rate remained steady at 2,8% against market expectations of an uptick to 2.9%.
- On Thursday, the US third quarter's Gross Domestic Product was revised higher to a 3.1% annualized growth from the previously estimated 2.8% increase.
- Beyond that, data from the Labor Department revealed that Jobless Claims grew by 220K in the week of November 13, well below the 230K expected and a 242K increase in the previous week.
- The Bank of Mexico’s inflation forecasts reveal that the country’s Consumer Prices Index (CPI) will end the year at 4.6%, down from previous estimations of 4.7%, but will not converge with the central bank’s target until the second half of 2026
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.13% | 0.04% | -0.38% | -0.03% | 0.25% | 0.12% | -0.33% | |
| EUR | 0.13% | 0.17% | -0.20% | 0.13% | 0.40% | 0.25% | -0.20% | |
| GBP | -0.04% | -0.17% | -0.37% | -0.07% | 0.20% | 0.08% | -0.37% | |
| JPY | 0.38% | 0.20% | 0.37% | 0.33% | 0.60% | 0.46% | 0.03% | |
| CAD | 0.03% | -0.13% | 0.07% | -0.33% | 0.27% | 0.15% | -0.30% | |
| AUD | -0.25% | -0.40% | -0.20% | -0.60% | -0.27% | -0.14% | -0.57% | |
| NZD | -0.12% | -0.25% | -0.08% | -0.46% | -0.15% | 0.14% | -0.44% | |
| CHF | 0.33% | 0.20% | 0.37% | -0.03% | 0.30% | 0.57% | 0.44% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Mexican Peso technical outlook: USD/MXN returns below 20.30 and approaches key support at 20.00
The USD/MXN recovery has been capped at 20.50 and the pair is gaining bearish traction ahead of the US PCE Pricesd Index release, with price action falling below 20.30 and approaching a key supporter area at 20.00.
Technical indicators suggest that bears are gaining control with the Relative Strength Index (RSI) falling below 50 in the 4-hour chart. On the downside, the next target is the mentioned 20.00 level (November 19 and December 16 lows) and then 19.75 (October 22 and 24 and November 7 and 8 lows). Resistances are at Thursday’s high of 20.50, ahead of the November 6 and 26 highs at 20.80.
USD/MXN 4-Hour Chart
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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