Mexican Peso roars back as Mexico's GDP surprise pushes USD/MXN lower
- USD/MXN plunges 1.17% to 18.56 as Peso buyers return.
- Mexico's GDP expanded 3.2% in Q3, beating forecasts of 2.5%.
- December Fed hike odds ease to 77% ahead of US midterms.
The Mexican Peso (MXN) stages a comeback against the US Dollar (USD) as the week begins, following last Friday's strong GDP figures. At the same time, traders brace for the outcome of the US elections on Tuesday, even as they digest the latest ISM Manufacturing PMI report. USD/MXN trades at 18.56, down 1.17%, at the time of writing.
USD/MXN tumbles as stronger economic growth and fading Fed hike bets weaken the Dollar
Last Friday, INEGI, Mexico’s National Statistics Agency, reported that Gross Domestic Product (GDP) expanded 0.9% in Q3 QoQ, above estimates of 0.7% but slower than Q2’s 1.4% growth. On an annual basis, Mexico’s economy grew 3.2%, above economists' estimates of 2.5%.
Regarding this, Mexico’s Finance Minister said that growth could reach the upper end of the government’s forecasts if momentum is sustained.
In the US, the Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) rose from 54.5 to 55.5 in October, beating forecasts of 54.6. Although the data hints at overall economic strength, money markets trimmed the chances of a 25-basis-point rate hike from 80% a week ago to 77%, according to the CME FedWatch Tool.
This could be attributed to Oil prices diving amid rising hopes for a resumption of peace talks between the US and Iran. News of a breakthrough in negotiations has arisen, and both sides are closing in on a preliminary agreement.
USD/MXN traders are also focused on US mid-term elections. According to Polymarket, the Democrats have a 75% chance of controlling the US Senate, and a 96% chance of controlling the US House of Representatives.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 18.5752, extending its advance well above the moving average triple (50-, 100- and 200-day simple moving averages) clustered near 17.7802, which reinforces a bullish near-term bias. The pair is pushing further away from the long-standing downward resistance trend line drawn from 21.0808, suggesting that the broader recovery phase remains intact, while the 14-day Relative Strength Index has cooled toward 58.6 from overbought readings, hinting at still constructive but less aggressive upside momentum.
On the topside, the primary obstacle is the descending resistance trend line that continues to cap the broader structure above the market, and any clear rejection there could slow the rally. On the downside, initial support is seen at the moving average triple around 17.78, before the horizontal floor at 16.89, where buyers would be expected to re-emerge on deeper corrective dips.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
