Mexican Peso rallies on tariff suspension ahead of US NFP data
Most recent article: Mexican Peso struggles to hold gains, loses ground versus USD
- Trump delays reciprocal tariffs on Mexico until April 2 after talks with Sheinbaum.
- USD/MXN briefly falls as tariff relief boosts MXN before rebounding above 20.30.
- Traders eye Mexico’s inflation data and US Nonfarm Payrolls for further direction.
The Mexican Peso (MXN) appreciated against the US Dollar (USD) on Thursday after United States (US) President Donald Trump said that Mexico would be exempt from paying tariffs on anything falling within the United States-Mexico-Canada Agreement (USMCA). The USD/MXN is trading at 20.26, down 0.55%.
Recently, Mexico’s President Claudia Sheinbaum called Trump and agreed on a delay of one month, until April 2, when reciprocal tariffs will begin. Trump posted on its social network “Our relationship has been a very good one, and we are working hard, together, on the Border, both in terms of stopping Illegal Aliens from entering the United States and, likewise, stopping Fentanyl.”
As the news broke, the USD/MXN pair retreated to a daily low of 20.21, beneath the 100-day Simple Moving Average (SMA) of 20.33. Since then, buyers have pushed the exchange rate above 20.30.
Traders are also eyeing the release of Mexico’s inflation figures for February. The Consumer Price Index (CPI) and Core CPI are expected to drop monthly. However, according to a Reuters poll, both readings will pick up yearly.
Meanwhile, US jobs data was mixed, with the number of people filing unemployment claims dipping compared to the previous reading, revealed the Department of Labor. The Challenger jobs report showed layoffs rose to levels not seen since the last two recessions due to mass federal government job cuts.
Ahead of this week, traders will watch the release of February Nonfarm Payrolls, which are expected to rise above January’s figures.
Daily digest market movers: Mexican Peso advances on positive trade news
- Mexico’s CPI for February is projected to dip by 0.27% MoM, down from 0.29%. In the twelve months to February, it would likely rise by 3.77%, up from 3.59%. Core CPI for the same period is projected to rise 0.46% MoM from 0.41%. Over one year, core prices are projected to drop from 3.66% to 3.62%.
- Banco de Mexico's (Banxico) private economists' survey showed that headline inflation is forecast to end at 3.71%, while core CPI is expected to finish at 3.75%. The USD/MXN exchange rate is projected to end at 20.85 in 2025, slightly lower than the 20.90 projection in the previous survey. However, for 2026, they anticipate a sharper depreciation of the Peso, well beyond the 21.30 level expected in January’s poll.
- US Initial Jobless Claims for the week ending March 1 increased by 221K, below estimates of 235K and last week’s 242K.
- Challenger Job Cuts in February soared from 49.795K to 172.017K, blamed on DOGE actions. Challenger, Gray & Christmas revealed that the government accounted for the bulk of the layoffs, for 62,242 job cuts by the federal government.
- Hence, money market traders had priced in 74 basis points of easing in 2025, up from Wednesday's 72 bps, via data from the Chicago Board of Trade (CBOT).
- Trade disputes between the US and Mexico remain front and center. If countries could come to an agreement, it could pave the way for a recovery of the Mexican currency. Otherwise, further USD/MXN upside is seen, as US tariffs could trigger a recession in Mexico.
USD/MXN technical outlook: Mexican Peso surges as USD/MXN drops below 20.40
USD/MXN continues to trade sideways, but sellers seem to have the upper hand. If the exotic pair prints a daily close below the 100-day SMA, a re-test of the 20.00 psychological figure is on the cards. A breach of the latter would expose the 200-day SMA at 19.54.
Otherwise, if USD/MXN climbs past the 100-day SMA, the next resistance would be 20.50. If surpassed, the next key resistance levels would be the March 4 peak at 20.99 and the year-to-date (YTD) peak of 21.28.
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.
Author
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
