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USD/MXN carved out an interim high near 21.28 earlier this week and re-integrated within its multi-month range; this denotes lack of steady upward momentum, Societe Generale’s FX analysts note.
“This is also highlighted by the daily MACD, which has turned flattish and has experienced crisscross moves around its trigger line. Short-term price action could remain within a range defined by limits at 20.12/20.00 and 21.00; a break beyond one of these bands is essential to confirm a directional move.”
The USD/MXN pair bounces back to near $20.50 in Tuesday’s European session after nosediving from Monday’s high of 21.29. The pair gains as the Mexican Peso gives up some gains that were inspired by United States (US) President Donald Trump’s decision to postpone his orders of imposing 25% tariffs on Mexico and Canada.
President Trump delayed his tariffs plans on Mexico after it agrees to support the US to restrict the passage of drugs and undocumented immigrants to their economy. In a way to dodge tariffs, Mexican President Claudia Sheinbaum took the matter seriously and supported Trump’s agenda of tightening immigration controls by sending 10,000 troops on the border. The event also frozen risks of economic damage to the Mexican economy for now.
Meanwhile, investors are expecting that Trump’s tariff agenda is mere a tool to have a dominant position in negotiations with US’s trading partners, which has diminished safe-haven risk premium of the US Dollar (USD). The USD faces a sharp selling pressure in every attempt of revival from Monday, with the US Dollar Index (DXY) trading cautiously around 108.40.
Going forward, the major trigger for the US Dollar will be the US JOLTS Job Openings data for December, which will be published at 15:00. The economic data will show the current status of labor demand. Economists expect that employers posted 8 million fresh jobs, marginally lower than almost 8.10 million in November.
Investors will pay close attention to the job openings data as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.
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.
USD/MXN hits the week by extending its gains for the third successive session, trading near 21.20 during the Asian hours on Monday. The pair has surged over 2% following US President Donald Trump's decision to impose 25% tariffs on Mexican imports. Set to take effect on Tuesday, the tariffs target concerns such as illegal immigration and fentanyl smuggling. In response, Mexican President Claudia Sheinbaum announced retaliatory tariffs on Saturday, ranging from 5% to 20%.
The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, rises for the fifth successive day and trades above 109.50 at the time of writing. ISM Manufacturing PMI for January will be eyed later on Monday.
Meanwhile, US inflation data reinforced the Federal Reserve’s (Fed) hawkish stance on the monetary policy outlook. The Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, rose 0.3% MoM in December, up from 0.1% in November. On an annual basis, PCE inflation accelerated to 2.6% from the previous 2.4%, while core PCE, which excludes food and energy, remained steady at 2.8% YoY for the third straight month.
The US tariffs along with the economic slowdown reinforce the expectations surrounding the Banco de México (Banxico) to deliver a larger rate cut on Thursday. However, the central bank was expected to lower rates by at least 25 basis points (bps), bringing them down from 10% to 9.75%, though analysts at Capital Economics suggest a 50 bps cut remains a possibility.
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.
The USD/MXN pair continues its upward momentum for the second consecutive session, trading around 20.70 during Asian hours on Friday. The Mexican Peso (MXN) remains under pressure following renewed tariff threats from US President Donald Trump.
On Thursday night, Trump reiterated plans to impose a flat 25% import tax on all goods entering the US from Canada and Mexico, citing concerns over fentanyl. The first wave of tariffs on both countries is set to take effect on February 1, according to Reuters. Additionally, Trump hinted at the possibility of imposing tariffs on Canadian and Mexican Oil exports.
In a separate statement on X (formerly Twitter), Trump also reaffirmed his threat to levy 100% tariffs on BRICS nations if they attempt to introduce an alternative currency to challenge the US dollar in international trade.
Economic data from Mexico further weighed on the Mexican Peso. INEGI reported that Mexico’s GDP shrank by 0.6% in Q4 2024, a sharp contrast to the 1.1% expansion in the previous quarter and well below market expectations of a 0.2% decline. This marks the first contraction since Q3 2021. On an annual basis, GDP grew by just 0.6%, missing forecasts of 1.2% and reaching its lowest rate since Q1 2021.
The economic slowdown aligns with signals from Banco de México (Banxico) that larger rate cuts could be on the horizon, particularly if US tariff threats materialize. The central bank is expected to lower rates by at least 25 basis points (bps), bringing them down from 10% to 9.75%, though analysts at Capital Economics suggest a 50 bps cut remains a possibility.
Meanwhile, US economic data showed signs of slowing growth. The Department of Commerce reported that Gross Domestic Product Annualized (Q4) fell to 2.3% from 3.1%, missing expectations of 2.6%. Additionally, Initial Jobless Claims for the week ending January 24 came in at 207K, below forecasts of 220K but an improvement from the previous week’s 223K.
Investors now turn their attention to key US data releases later on Friday, including Personal Consumption Expenditures (PCE), Personal Income and Spending figures, and the Chicago Purchasing Managers' Index (PMI).
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
The USD/MXN pair regains positive traction during the Asian session on Tuesday and remains close to its highest level since July 2022 touched last week. Spot prices currently trade around the 20.70-20.75 area, up over 1.0% for the day, in the wake of US President Donald Trump's tariff remarks and resurgent US Dollar (USD) demand.
The Mexican Peso (MXN) weakens after Trump said this Tuesday that he intends 25% tariffs on Canada and Mexico, and the target date for tariffs would be as soon as early February. This comes on top of overnight dovish comments from Banco de Mexico (Banxico) Deputy Governor Jonathan Heath, saying that headline and core inflation rates will likely land below 4% in January. Heath added that the bank does not need to exaggerate a restrictive posture, which, along with the emergence of some USD buying provides a goodish lift to the USD/MXN pair.
The USD Index, which tracks the Greenback against a basket of currencies, rebounds swiftly from a two-week low touched on Monday amid worries that Trump's protectionist policies would reignite inflationary pressures. Furthermore, Trump's comments revived trade war fears and further benefits the safe-haven buck. That said, the recent signs of abating inflation in the US lifted market bets that the Federal Reserve (Fed) will cut interest rates twice this year. This, in turn, caps any further appreciating move for the buck and the USD/MXN pair.
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.
The Mexican Peso collapsed against the Greenback after US President-elect Donald Trump said on Monday that he threatened to impose 25% tariffs on Mexico. Trump blamed the country for not battling drug cartels enough and allowing the passage of illegal immigrants into the US. The USD/MXN trades at 20.77 at the time of writing, gaining more than 2%.
Late on Monday, Trump’s remarks lifted the USD/MXN from around 20.29 to its daily high of 20.74 before retreating somewhat during the European session. Nevertheless, as the North American session kicked in, the Peso remained pressured as the exotic pair advanced toward the 20.70 area.
In response to Trump, Mexican President Claudia Sheinbaum said, “One [US] tariff will be followed by another [from Mexico], and so on until we put common enterprises at risk.” She added, “The main victims will be US consumers” who buy manufactured cars from Mexico.
Aside from this, Mexico’s economic docket remains scarce on Tuesday, but it will feature the release of the Bank of Mexico's (Banxico) latest meeting minutes. Banxico unanimously lowered rates by 25 basis points (bps) on November 14 to 10.25% as expected.
Last week, Banxico Governor Victoria Rodriguez was dovish, hinting that the institution might look to decrease rates by more than 25 bps due to the progress on disinflation. Headline inflation during the first two weeks of November dipped from 4.68% to 4.56% YoY.
In the US, the economic docket revealed that Consumer Confidence improved above estimates and October’s reading. However, traders are awaiting the release of the Federal Reserve’s (Fed) last Meeting Minutes.
Ahead this week, the US economic docket will feature Durable Goods Orders, Initial Jobless Claims, and the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index.
The USD/MNXN remains upwardly biased and approaches the current day’s peak of 20.76 on Trump’s remarks. A clear break will expose the year-to-date (YTD) high of 20.80, followed by the psychological 21.00 mark. If surpassed, the exchange rate would test the March 8, 2022, peak at 21.46, followed by the November 26, 2021, high at 22.15.
Conversely, if sellers clear 20.50, they would eye the previous year-to-date peak of 20.22. Once taken out, up next would be the 20.00 mark, followed by the November 7 low and the 50-day Simple Moving Average (SMA) around 19.75/86.
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.
The USD/MXN pair surges to around 20.50, the highest since early November, during the early European session on Tuesday. The Mexican Peso (MXN) weakens sharply after US President-elect Donald Trump vowed to enact 25% tariffs on all products from Mexico.
Early Tuesday, Trump said that he would announce a 25% tariff on all products from Mexico and Canada from his first day in office and impose an extra 10% tariff on goods from China. The prospect of likely substantial tariffs has prompted traders to become more cautious about the currencies of the United States' (US) trading partners. This, in turn, drags the MXN lower against the Greenback as Mexico is the number one exporter to the US.
“Risk sentiment is getting crushed for now on Trump’s tariff risks — the dollar is being viewed as a haven and the affected nations’ currencies like the Mexican peso are getting hammered,” said Mingze Wu, currency trader at StoneX Financial.
Investors will take more cues from the FOMC meeting minutes, which is due later on Tuesday. The cautious stance from the Federal Reserve (Fed) could contribute to the USD’s upside, while the dovish tone from the Fed officials might weigh on the USD in the near term. On Wednesday, the US preliminary Gross Domestic Product (GDP) data for the third quarter (Q3) and Core Personal Consumption Expenditures (Core PCE) - Price Index for October will be in the spotlight.
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.
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