- USD/MXN falls over 0.30% as US headline inflation drops, encouraging Fed’s likely pause in June.
- Despite the US Dollar drop, Treasury bond yields rise; 10-year note at 3.827%.
- Bank of Mexico Governors emphasize the need for maintaining higher rates.
USD/MXN tumbles to fresh seven-year lows, achieved during the last six trading days, courtesy of US Dollar (USD) weakness. A US inflation report sent the US Dollar sliding against most G10 FX peers, alongside the Mexican Peso (MXN). At the time of writing, the USD/MXN is trading at 17.2164, down more than 0.30%.
Upbeat market sentiment and cooling US inflation boost risk-sensitive Mexican Peso
The market sentiment remains upbeat, a positive sign for the Mexican Peso, which is seen as a risk-sensitive currency. May inflation in the US flashed signs of cooling down, with headline inflation, known as the Consumer Price Index (CPI), dropping 0.8% from April’s 4.9% to 4% YoY. Additionally, excluding volatile items like food and energy, also known as Core CPI, edged lower, 0.2% to 5.3% YoY, aligned with estimates. However, core CPI month-over-month (MoM) remained unchanged for the second straight month, indicating that inflation still lingers in the economy.
Following the data release, the US Dollar Index (DXY), which measures the buck’s value against a basket of its rivals, dives 0.27% at 103.347 after hitting three-week lows. At the same time, US Treasury bond yields, particularly the 10-year benchmark note, are at 3.827%, eight basis points higher than its opening price.
That said, Wall Street expects the Fed to pause in June but is likely to resume in July, according to the latest figures reported by the CME FedWatch Tool. Money market futures odds for a quarter percentage increase to the Federal Funds Rate (FFR) are 62.5% and continue to aim up compared to the last week.
In tomorrow’s Federal Reserve Open Market Committee (FOMC)meeting, the Federal Reserve will also update the Summary of Economic Projections (SEP) and the Dot-Plot, which is foreseen to cement the Fed’s hawkish stance, not as a dovish pivot.
Across the border, the Mexican economic docket was absent. Still, the latest remarks by the Bank of Mexico (Banxico) Governors, Victoria Rodriguez Ceja and Jonathan Heath, stressed the need to hold higher rates for at least two meetings.
Upcoming events
On Wednesday, the US economic agenda will feature May’s Producer Price Index (PPI), the FOMC’s decision, and Fed’s Chair Jerome Powell’s press conference.
USD/MXN Price Analysis: Technical outlook
The USD/MXN is set to continue to drop further, pending decisively cracking the 17.2000 mark, albeit hitting a new YTD low of 17.1990. Though a daily close below the latter would send the USD/MXN plummeting toward the 2016 low of 17.0500 before challenging the 17.00 mark. Conversely, if USD/MXN pierces May’s low turned support at 17.4038, that could open the door for a recovery toward the 50-day Exponential Moving Average (EMA) at 17.5166.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks

AUD/USD stays defensive near 0.6300; eyes a weekly decline
AUD/USD stays on the back foot near the 0.6300 mark early Friday, on track to end in the red for the first time in three weeks. Uncertainty over Trump’s tariffs, a weaker risk tone-led renewed US Dollar demand and disappointing Aussie jobs data act as headwinds for the pair.

USD/JPY re-attempts 149.00 after Japanese inflation data
USD/JPY edges higher and battles 149.00 following the release of Japan's National Core CPI, though it lacks bullish conviction amid the divergent BoJ-Fed policy expectations. Moreover, trade jitters and geopolitical risks induced cautious sentiment keep the safe-haven Japanese Yen afloat, restricting the pair.

Gold traders look to cash in but bullish potential remains intact
Gold price is looking to extend its previous retreat from all-time highs of $3,058 in Asian trading on Friday. Despite the pullback, Gold price remains on track to book the third consecutive weekly gain.

Bitcoin, Ethereum and Ripple stabilize as SEC Crypto Task Force prepares for First roundtable discussion
Bitcoin price hovers around $84,500 on Friday after recovering nearly 3% so far this week. Ethereum and Ripple find support around their key levels, suggesting a recovery on their cards.

Tariff wars are stories that usually end badly
In a 1933 article on national self-sufficiency1, British economist John Maynard Keynes advised “those who seek to disembarrass a country from its entanglements” to be “very slow and wary” and illustrated his point with the following image: “It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction”.

The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.