Mexican Peso suffer sharp losses as US inflation boosts the Dollar
- USD/MXN surges 0.65%, reaching 18.60 before retreating toward 18.51.
- US headline inflation accelerates to 3.7%, while core CPI reaches 2.6%.
- October Fed hike odds jump to 42% ahead of US PPI.
The Mexican Peso depreciates versus the US Dollar, down some 0.65% on the heels of hot US inflation data, fueling bets that the Federal Reserve could raise rates at the October meeting. The USD/MXN trades at 18.51, after bouncing off daily lows of 18.35.
USD/MXN hits 18.60 as hot US CPI fuels October Fed hike bets
The exotic pair resumed its uptrend and hit a high of 18.60 Pesos per US Dollar as the US CPI ignited an increase in hawkish bets for this month's meeting. The CPI in September rose above estimates, from 3.4% to 3.7% YoY, and on a monthly basis, as well as week-on-week, at 0.6%, as foreseen.
The jump in gasoline, diesel, and food prices is to blame for the reacceleration of headline CPI. Excluding volatile items, the so-called core CPI expanded from 2.4% to 2.6% YoY, also above the street’s projections.
Underlying prices drifted higher on a rise in shelter, owners' equivalent rent, recreation and education costs.
Given the backdrop, investors increased the odds for a rate hike from 22% a day ago to 42%, for the October meeting. Meanwhile, market participants turn the page, eyeing the release of the Producer Price Index (PPI) on October 15.
Recently, Fed officials crossed the wires. Chicago’s Fed President Austan Goolsbee said that “CPI data was discoursing,” adding that hot CPI is “unacceptable,” reaffirming his hawkish stance at a Yahoo! Finance interview.
Richmond Fed President Thomas Barkin commented that CPI ran too hot, and that for October’s meeting, he is open.
On Tuesday, the New York Fed President John Williams said that he sees another rate hike in 2026 and none in 2027.
The US economic calendar will feature the Producer Price Index (PPI), Retail Sales, Initial Jobless Claims, and additional Fed speeches.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 18.4925, extending its advance above the reclaimed downward trend line, last resisted around 18.1200, and the clustered simple moving averages (50, 100 and 200-day) near 17.37. Price location above these structural levels sets a bullish near-term bias, although the Relative Strength Index (14) around 73 signals overbought conditions that hint at stretched upside momentum and raise the risk of a corrective pause rather than an immediate trend reversal.
On the downside, initial support is seen at the former resistance trend line near 18.12, which now acts as the first buffer ahead of the grouped long-term simple moving averages around 17.37, while a deeper pullback would expose the horizontal floor at 16.89. With no clear overhead resistance levels in play from the current dataset, dips toward the 18.12–17.37 area are likely to attract buyers as long as the pair holds above these supports, even if overbought momentum prompts short-term consolidation.
(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.
