- Mexican Peso gains amid US Dollar weakness and reduced trade fears, ignore mixed Mexican economic activity data.
- Mid-month inflation falls to 3.69% YoY, nearing Banxico's 3% target, backing dovish policy.
- Trump's moderate comments on Mexico at WEF reduce trade worries; key GDP and trade data anticipated.
The Mexican Peso (MXN) surged in early trading during the North American session as mixed economic growth figures emerged in Mexico, though broad US Dollar (USD) weakness kept the Peso bid. At the time of writing, the USD/MXN trades at 20.16, down 1%.
The Instituto Nacional de Estadistica Geografia e Informatica (INEGI) revealed that November’s Economic Activity improved monthly but not yearly. With more than 2.70% gains, the Mexican currency is set to post its best weekly performance since September 2024.
United States (US) President Donald Trump tempered his comments about Mexico and delivered upbeat remarks about the country at the World Economic Forum (WEF), which eased trade policy fears and sponsored a leg-down on USD/MXN.
Meanwhile, mid-month inflation for January dipped towards the Banco de Mexico (Banxico) 3% goal. The Consumer Price Index (CPI) rose by 3.69% YoY, from 4.44% reported in December, while the core CPI rose moderately from 3.62% to 3.72% YoY.
In the US, S&P Global revealed that manufacturing activity exited contractionary territory but failed to bolster the Greenback. Meanwhile, Consumer Sentiment revealed by the University of Michigan (UoM) deteriorated compared to preliminary ratings, while housing data improved via Existing Home Sales.
Mexico’s economy has continued to cool down and is expected to grow by just 1% in 2025. The slowdown benefited the disinflation process and supports Banxico’s dovish stance.
The Federal Reserve (Fed) is expected to keep rates unchanged. The board's main reasons for that decision are the robustness of the US economy, as portrayed by healthy economic growth, a strong labor market and stickier inflation numbers.
Next week, Mexico’s economic docket will feature the Balance of Trade, jobs data and the preliminary reading of the Gross Domestic Product (GDP) for the last quarter of 2024.
Daily digest market movers: Mexican Peso climbs amid mixed economic activity figures
- The Mexican Peso advances versus the US Dollar even though the lowest inflation figures suggest that Banxico will cut rates. Contrarily, the Fed is expected to keep monetary policy unchanged and wait for the March meeting.
- INEGI revealed that Economic Activity for November improved from -0.7% to 0.4% MoM. In the twelve-month period, the figures dipped from 0.8% to 0.5%, missing the 0.6% projected.
- Citi revealed its Expectations Survey, in which Mexican private economists revised Gross Domestic Product (GDP) figures for 2025 downward to 1%.
- Regarding inflation expectations, analysts estimate headline and core to inflation to dip below 4%, each at 3.91% and 3.68%, while the exchange rate would likely end near 20.95.
- Economists estimate that Banco de Mexico (Banxico) will lower rates by 25 basis points (bps) from 10.00% to 9.75%, though some analysts expect a 50-bps cut at the February 6 meeting.
- US S&P Global Manufacturing PMI for December increased by 50.1 from 49.4, exceeding the forecast. Meanwhile, the Services PMI deteriorated from 56.8 to 52.8.
- Money market futures have priced in 45 bps of Fed rate cuts in 2025, according to CME FedWatch Tool data.
USD/MXN technical outlook: Mexican Peso rallies as USD/MXN tumbles below 20.30
The USD/MXN falls below the 50-day Simple Moving Average (SMA) of 20.37 and extended its losses toward the 100-day SMA at 20.22, but bears failed to push prices below the latter, as it consolidates near the mid-point of the 20.20 – 20,30 range.
Momentum turned bearish as portrayed by the Relative Strength Index (RSI). Therefore if USD/MXN tumbles beneath 20.20, the next support would be the 20.00 figure. On further weakness, the next support would be November 7 swing low of 19.75, ahead of the October 18 low of 19.64.
Conversely, for a bullish resumption, the USD/MXN must climb above 20.55 so buyers have a clear path to challenge the year-to-date (YTD) high at 20.90. Once surpassed, the next stop would be 21.00, followed by March 8, 2022, peaking at 21.46 ahead of the 22.00 figure.
Banxico FAQs
The Bank of Mexico, also known as Banxico, is the country’s central bank. Its mission is to preserve the value of Mexico’s currency, the Mexican Peso (MXN), and to set the monetary policy. To this end, its main objective is to maintain low and stable inflation within target levels – at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%.
The main tool of the Banxico to guide monetary policy is by setting interest rates. When inflation is above target, the bank will attempt to tame it by raising rates, making it more expensive for households and businesses to borrow money and thus cooling the 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. The rate differential with the USD, or how the Banxico is expected to set interest rates compared with the US Federal Reserve (Fed), is a key factor.
Banxico meets eight times a year, and its monetary policy is greatly influenced by decisions of the US Federal Reserve (Fed). Therefore, the central bank’s decision-making committee usually gathers a week after the Fed. In doing so, Banxico reacts and sometimes anticipates monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised rates, Banxico did it first in an attempt to diminish the chances of a substantial depreciation of the Mexican Peso (MXN) and to prevent capital outflows that could destabilize the country.
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

How will markets react to Nonfarm Payrolls data in tariffs aftermath? – LIVE
The March employment report, which will feature Nonfarm Payrolls and Unemployment Rate figures, will be watched closely on Friday. Investors will try to figure out how labor market conditions could influence the Fed's policy outlook, especially after tariff announcements.

EUR/USD corrects sharply toward 1.0950 ahead of US NFP, Powell
EUR/USD is extending its correction toward 1.0950 in the European session on Friday. The US Dollar has come up for air after the trade war and recession fears-led sell-off, weighing on the pair. Traders look to the US NFP report and Fed Chair Powell's speech for fresh directives.

Gold price sticks to negative bias around $3,100; bears seem non-committed ahead of US NFP report
Gold price meets with a fresh supply on Friday, though the downside potential seems limited. Trump’s tariffs-inspired risk-off mood might continue to act as a tailwind for the precious metal. Fed rate cut bets weigh on the USD and also contribute to limiting losses for the XAU/USD pair.

Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.

Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.

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.