The Mexican peso continues to face a difficult environment in the short term. This can be seen in the recent performance of USD/MXN, which has gained more than 1.1% over the last three trading sessions, highlighting increasingly persistent weakness in the Mexican currency.
Buying pressure around the pair continues to be driven primarily by expectations of a more flexible Bank of Mexico over the coming months, along with the recent decline in Mexican bond yields. This dynamic remains relevant ahead of tomorrow's inflation release and, as long as markets continue to perceive a more cautious central bank, buying pressure around USD/MXN could remain a dominant theme in the sessions ahead.
What Is Expected From Mexico's Inflation Data?
Tomorrow's session will bring the release of inflation figures for the first half of October in Mexico. For now, markets expect a reading of 0.37%, slightly above the 0.33% recorded in the previous report.
These expectations remain important because they continue to point toward a relatively controlled inflation environment, with no clear signs of a significant acceleration in the short term. Forecasts have also remained fairly accurate in recent months. Since March, there have been no major deviations between market expectations and the final inflation readings, reinforcing expectations of a relatively stable inflation backdrop.
This continues to support the view that inflation does not currently represent a major threat to Mexican monetary policy, leaving room for the Bank of Mexico to adopt a more flexible stance over the coming months without the need to maintain exceptionally high interest rates.
Source: FXstreet
This remains particularly relevant because several members of the central bank's board have recently suggested there is less urgency to maintain an aggressive monetary policy stance. In fact, recent developments show that three of the five board members have expressed openness to discussing potential rate cuts, highlighting an increasingly cautious approach and a reduced level of concern over short-term inflation risks.
Most importantly, expectations of a more flexible central bank have already begun to affect Mexico's bond market. Over recent sessions, 10-year government bond yields have continued to decline, moving closer to the 9.2% area and pulling away from the highs observed several weeks ago.
This is significant because lower yields tend to reduce the attractiveness of peso-denominated investments while also weakening the appeal of the currency for international investors seeking high interest-rate differentials. As a result, demand for the Mexican peso could continue to soften in the short term.
Source: TradingEconomics
Taking all of this into account, expectations of a more cautious Bank of Mexico appear to be reducing the relative attractiveness of Mexico's fixed-income market and remain an important factor behind the peso's recent weakness. If tomorrow's inflation figures come in close to expectations and continue to show limited inflationary pressures, the perception of a more flexible central bank could gain even more relevance. Under that scenario, the peso may continue to struggle to recover ground, allowing buying pressure around USD/MXN to remain an important feature of the market.
USD/MXN Technical Forecast
Source: StoneX, Tradingview
The bullish trend is becoming the dominant structure:: Over recent weeks, USD/MXN has developed an increasingly aggressive bullish structure. The formation of higher highs and higher lows has reinforced a short-term uptrend, while a recent golden cross has emerged as the 50-period moving average moved above the 200-period moving average. This reading supports an increasingly constructive outlook for buyers and, as long as price continues breaking through key resistance levels, the current bullish trend could gain further strength in the weeks ahead.
MACD: The MACD histogram continues to trade very close to the 0 neutral line, reflecting a relatively balanced dynamic in short-term moving-average momentum. This reading suggests that despite the broader bullish structure, a degree of market indecision remains present.
RSI: The RSI remains particularly relevant as the indicator continues to trade close to the 70 overbought threshold. While this supports the strong bullish momentum seen in recent sessions, it also warns that buying pressure may be becoming stretched, potentially creating room for short-term technical pullbacks.
Key Levels:
18.70 – Key Resistance: A major resistance zone observed during previous months that remains the most important upside barrier on the chart. A sustained move above this level could reinforce bullish control, strengthen the sequence of higher highs, and support a more established uptrend over the coming weeks.
18.40 – Current Barrier: A level that aligns with important recent retracements and remains the main reference to monitor in the event of short-term bearish corrections.
18.00 – Key Support: A significant support zone observed during previous weeks that also coincides with an important psychological level for the market. A move back toward this area could place the current bullish trendline at risk and favor a more evident phase of consolidation in the short term.
Written by Julian Pineda, CFA, CMT – Market Analyst
Mexican Peso Outlook UBS and Crédit Agricole Split Over 2027 Direction The Mexican Peso could strengthen or surrender ground against the US Dollar in 2027, with UBS and Crédit Agricole taking opposing currency views. UBS and Crédit Agricole expect the Mexican Peso to move in opposite directions over the coming year, setting markedly different forecasts for the same September 2027 horizon.
UBS projects USD/MXN at 17.20, against Crédit Agricole's 18.75.
The comparison captures a disagreement over the Peso's direction, with the exchange rate close to 18 in both banks' recent forecast documents.
Against that approximate reference, UBS's projection implies roughly 4.7% Peso appreciation, while Crédit Agricole's points to a decline of around 4%.
UBS retains its recovery view after a near-term setback UBS's optimism survives a recent reassessment of the Dollar's strength.
As Exchange Rates UK reported in our coverage of UBS's revised Peso outlook, the bank raised its nearer-term USD/MXN projection while retaining its September 2027 recovery target.
That earlier analysis argued that the Peso could continue to attract investors seeking interest income, even with a smaller advantage over US rates.
UBS said: "Despite the narrower US-Mexico rate differential, the global backdrop remains supportive for carry strategies given still benign financial conditions."
Investors funding Peso holdings in another currency must weigh the interest earned against both their financing costs and the risk of exchange-rate losses.
Mexico's central-bank overnight policy rate stands at 6.50%.
A weaker Peso can offset part or all of the additional interest income, particularly if US yields also rise and narrow Mexico's relative appeal.
UBS's earlier assessment identified a sharp US slowdown and disputes over the US-Mexico-Canada trade agreement as risks to the currency.
Those risks expose a tension in the Peso's relationship with its northern neighbour: a strong US economy can support Mexican activity, while higher US interest rates can make Dollar assets harder to compete with.
Crédit Agricole expects a less favourable outcome Crédit Agricole's higher USD/MXN target fits a more selective approach to emerging-market currencies.
In earlier coverage of its Latin American currency outlook, the bank distinguished potential gains elsewhere in emerging markets from a weaker assessment of the Mexican and Colombian Pesos.
The bank said: "We do not expect a full-fledged appreciation of EM FX vs the USD."
Its latest forecast leaves the Mexican Peso weaker by September 2027 even though the bank expects the Dollar to lose ground against some other currencies over that period.
The banks also differ on Mexico's economic prospects.
UBS forecasts 2% growth in 2027, against Crédit Agricole's 1.2%, giving the Swiss bank a stronger domestic growth outlook alongside its more favourable currency projection.
USD/MXN exchange rate FAQ Will the Mexican Peso rise or fall vs the US Dollar in 2027?
The banks disagree. UBS expects appreciation by September 2027, while Crédit Agricole expects depreciation.
What are their USD/MXN targets?
For September 2027, UBS forecasts 17.20 and Crédit Agricole forecasts 18.75.
Does a lower USD/MXN mean a stronger Peso?
Yes. Each US Dollar would buy fewer Mexican Pesos.
Despite the recovery attempt seen at the start of the week, a renewed phase of weakness has become increasingly evident around the Mexican peso in the short term. This can be observed in recent USD/MXN price action, with the pair gaining more than 1.2% during today's session, reflecting a stronger U.S. dollar and a renewed loss of ground for the peso.
For now, buying pressure remains relevant around the pair even after the release of Mexico's inflation figures. This reaction suggests that markets still do not see enough room for a significantly more aggressive Bank of Mexico in the near term. As long as expectations remain centered on a cautious central bank, part of the relative appeal that the peso has maintained through its interest-rate advantage over other currencies may continue to fade, a dynamic that could keep supporting USD/MXN strength in the sessions ahead.
What Happened with Mexico's Inflation Data?
Mexico released its latest inflation figures during today's session. Annual inflation came in at 3.45%, slightly below the 3.47% expected by the market. However, the reading increased from the 3.12% observed in July and the 3.26% reported in August, reflecting a moderate acceleration compared with previous months.
Even so, the most important point is that inflation remains within the Bank of Mexico's target range and continues to trade below the upper limit of 4.00%, meaning that the recent increase remains relatively contained.
In addition, much of the increase came from more volatile components, mainly food prices, while core inflation continued to moderate for an eighth consecutive month, reaching 3.75%, its lowest level since 2025. This is particularly important because it suggests that the rebound in headline inflation is being driven by isolated factors rather than a broad-based acceleration in inflationary pressures. As a result, the data does not currently appear to represent a significant threat to the cautious policy approach that the Bank of Mexico has maintained in recent months.
Source: TradingEconomics
This remains important because the latest inflation figures do not appear strong enough to alter current expectations regarding Mexican monetary policy. For now, markets continue to price in a benchmark rate close to 6.50% by the end of 2026, assuming inflationary pressures do not deteriorate more significantly over the coming months.
This outlook is also reflected in the bond market. Yields on 10-year Mexican government bonds had already been moderating before the inflation release and continue to trade around the 9.3% area, moving further away from the highs observed earlier this year. Meanwhile, U.S. Treasury yields continue to display a different dynamic, holding near 5.2% and reflecting far greater stability in recent market activity.
The difference is important because, while Mexican bonds have gradually begun to lose some of their appeal, U.S. Treasuries continue to offer relatively attractive yields, a situation that could keep supporting capital flows toward dollar-denominated assets.
Source: TradingEconomics
Taking all of this into account, expectations of a more cautious Bank of Mexico have begun to reduce part of the relative appeal of the Mexican fixed-income market, while U.S. yields continue to show greater stability. This environment could continue limiting the attractiveness of peso-denominated investments and support demand for dollar-denominated assets. As long as these conditions remain in place, the Mexican peso may continue to struggle to recover ground consistently, leaving room for continued buying pressure around USD/MXN in the sessions ahead.
USD/MXN Technical Forecast
Source: StoneX, Tradingview
The aggressive uptrend continues to gain relevance: Over recent weeks, USD/MXN has been developing a pattern of higher highs, allowing a relevant bullish trendline to emerge in the short term. This structure remains the dominant technical pattern on the chart and, as long as buying pressure remains intact, the trend could continue consolidating as the market's primary technical reference in the weeks ahead.
MACD: The MACD histogram continues to trade above the 0 neutral line, reflecting that short-term moving-average momentum continues to favor a relevant bullish bias. This reading supports the importance that buying pressure continues to have within the pair's recent price action.
RSI: A similar picture can be observed in the RSI, which remains above the 50 neutral level, supporting the strength of the recent bullish momentum. However, the indicator has also moved above the 70 overbought threshold, a development that highlights the speed of the recent rally and could leave room for short-term corrective pullbacks.
Key Levels:
18.50 – Major Resistance: A zone of significant highs observed in previous months that currently stands as the most important upside barrier on the chart. Price action that manages to consolidate above this level could reaffirm the dominance of buying pressure, reinforce the development of higher highs, and support a more established bullish structure over the coming weeks.
18.00 – Current Barrier: A level that aligns with recent retracement zones and an important psychological reference for the market. This area could become the primary level to watch in the event of short-term corrective declines.
17.70 – Key Support: A zone of important lows observed in previous weeks that remains the most relevant downside barrier on the chart. Price action returning toward this area could place the current bullish trendline at risk and begin to reflect a more evident loss of direction, potentially favoring a broader phase of neutrality in the short term.
Written by Julian Pineda, CFA, CMT – Market Analyst
UBS has trimmed its near-term Mexican Peso recovery expectations, although it still sees interest rates supporting the MXN.
Foreign exchange analysts at UBS have raised year-end US Dollar to Mexican Peso (USD/MXN) exchange rate forecasts to 17.50 from 17.20, scaling back the recovery they expect from the Mexican currency.
Its March 2027 projection also rises to 17.40 from 17.20, while June and September remain unchanged at 17.20.
The revision follows a difficult week for the Peso: Federal Reserve exchange-rate data show USD/MXN rising from 17.2252 on 21 September to 17.6932 on 25 September.
UBS's new December target still sits below that Friday reference rate, implying some recovery in the Peso rather than further depreciation.
Higher global yields have reduced Mexico's interest-rate advantage, but UBS retains its case for carry, the income available from holding a higher-yielding currency.
"Despite the narrower US-Mexico rate differential, the global backdrop remains supportive for carry strategies given still benign financial conditions."
The bank expects Mexican policymakers to resist following the Federal Reserve mechanically:
"We expect Banxico to hold rates at 6.50% through 2026, prioritizing domestic conditions over its policy stance relative to the Fed."
Banxico held rates in September but removed guidance favouring an extended pause.
Goldman Sachs envisages a stronger near-term Peso recovery, forecasting USD/MXN at 16.75 in three months and 17.00 in six months.
Its twelve-month target of 17.25 is slightly above UBS's September 2027 forecast of 17.20, leaving little disagreement at that horizon.
UBS identifies US growth and trade relations as potential threats to the Peso's interest-rate appeal:
"A significant slowdown in the US economy would pressure the peso, as would USMCA trade disputes. Conversely, healthy risk sentiment and a search for carry could boost the peso, as would positive signals to investors from the US president."
Carry can cushion returns, but a large fall in the Peso can outweigh that income.
Exchange Rates UK Research
Our currency coverage draws on live market data, official economic releases and published bank research.
The final stretch of 2026 is approaching, and North America's major currencies have begun to show a shift in the strength dynamics seen earlier in the year. New expectations of a more aggressive monetary policy stance, particularly in the United States, could be significantly reshaping the outlook for the region. At the same time, this backdrop, combined with potential trade tensions across North America, may become one of the most important drivers of currency performance in the months ahead.
In this environment, both the Canadian dollar and the Mexican peso continue to show difficulties in consistently recovering against a U.S. dollar that has regained strength, particularly after the recent shift in expectations surrounding the Federal Reserve. If confidence in the USD remains resilient through the final part of the year, both USD/CAD and USD/MXN could continue to reflect a meaningful degree of indecision or even develop more sustained bullish pressure during the months ahead.
Are North America's Central Banks Moving in Different Directions?
As this article is being written, North America's central banks continue to follow different monetary policy paths. For now, Banco de México still maintains the highest interest rate in the region at 6.5%, although it has already reduced the benchmark from the 7.00% level seen at the beginning of the year. The institution continues to adopt a cautious approach while evaluating incoming economic data, supporting a relatively neutral outlook for the coming months.
Bank of Canada, meanwhile, remains the institution that has made the fewest changes compared with its regional peers. It has not adjusted interest rates since October 2025, leaving the policy rate unchanged at 2.25%, the lowest level in North America. This reflects a wait-and-see strategy as policymakers continue to assess economic conditions before making any new adjustments.
The Federal Reserve, by contrast, has begun to reshape the regional landscape. It is currently the only central bank that has resumed raising interest rates, moving the benchmark rate from 3.75% to 4.00%. In addition, the institution has started to signal a more aggressive stance for the months ahead, a dynamic that could continue to support the U.S. dollar against its regional counterparts.
North America Interest Rates Table 2025–2026
Color scale: Green to red. Green represents higher interest rates, while red represents lower rates in each country.
Source: Data - Tradingeconomics
North America Interest Rates Chart 2025–2026
Source: Tradingeconomics
The contrast between the three institutions becomes clear when looking at the evolution of interest rates over recent months. Mexico continues to maintain the highest policy rate in the region, the Bank of Canada the lowest, while the Federal Reserve stands out as the only institution that has resumed rate hikes during 2026. These differences not only reflect distinct rate levels but also monetary policy approaches that are becoming increasingly divergent across the three economies. These differences are also evident in the most recent communications from each central bank:
During its latest meeting, the Bank of Canada left rates unchanged at 2.25% on September 2. Although policymakers continue to acknowledge upside inflation risks, they made it clear that they are not yet prepared to begin a new tightening cycle, meaning any future adjustments will remain data dependent.
Banco de México's most recent decision took place on August 6 and concluded with rates unchanged at 6.5%. While the prolonged easing cycle appears to have come to an end, the institution continues to stress that rate hikes are not part of its base-case scenario, maintaining a prudent stance while assessing inflation trends.
In contrast, the Federal Reserve raised rates to 4.00% during its September 16 meeting. Policymakers highlighted the strength of economic activity and the labor market, while inflation continues to show insufficient signs of slowing, leaving the door open to further rate increases.
With that in mind, inflation remains one of the most important drivers of monetary policy decisions across the region. In Canada, inflation has eased to the 3.0% area from 3.2% in May. Although still above the 2.00% target, price pressures continue to moderate gradually. In Mexico, inflation slowed to 3.26% in August, making it the economy that has shown the clearest signs of disinflation across North America. In the United States, however, inflation remains near 3.4% after reaching a peak of 4.2% in May, still well above the Federal Reserve's 2.00% objective.
North America Inflation Trends 2025–2026
Source: Tradingeconomics
These figures paint a mixed picture. Mexico continues to display a more pronounced moderation in inflationary pressures, while Canada and especially the United States are still dealing with more persistent price pressures. This distinction is significant because it helps explain why markets are beginning to price in a more aggressive path for the Federal Reserve, supported both by recent comments from policymakers and by inflation data that has yet to show sustained improvement. Meanwhile, both Banxico and the Bank of Canada appear to have greater room to maintain cautious policy approaches in the months ahead.
Taken together, the differences that have started to emerge among North America's central banks could become one of the most important drivers of currency performance through the final months of 2026. While the Federal Reserve is moving toward a more restrictive stance supported by inflation that continues to show resilience, both Banxico and the Bank of Canada are maintaining more cautious approaches, aided by greater relative stability in their inflation trends. This divergence could begin to alter the balance of strength that prevailed throughout much of the year and restore some momentum to the U.S. dollar within the region, particularly if expectations for higher interest rates continue to build in the months ahead. Under this backdrop, the Mexican peso could begin to lose part of the advantage derived from its interest rate differential, while the Canadian dollar may continue to face challenges against a U.S. market supported by higher bond yields and the dollar's traditional role as a safe-haven asset. As a result, both USD/CAD and USD/MXN could begin to develop periods of greater indecision or even more sustained buying pressure over the coming months.
Has the Trade War Made a Comeback?
As 2026 draws to a close, one of the developments regaining attention is the growing trade dispute between the United States and Canada. On July 20, the United States announced tariffs of up to 50% on selected Canadian products and, following the collapse of negotiations, those measures took effect on August 22. In response, Canada imposed retaliatory measures on approximately CAD 27 billion worth of U.S. goods, including tariffs that also reach 50%.
Tensions escalated again on September 8, when the new Canadian measures officially came into force and the United States announced potential import restrictions on selected Canadian products. This measure, which would go beyond traditional tariffs, is expected to take effect on September 29.
Against this backdrop, sentiment toward the Canadian dollar has started to weaken. Not only has there been little progress toward a resolution, but the dispute could also begin to undermine perceptions of Canada's economic stability. This impact can be observed in the CXY, the index that measures the average strength of the Canadian dollar, where several episodes of trade escalation have coincided with declines in the indicator. Moreover, the currency has struggled to regain the highs seen months ago near the 72-point level, suggesting that the trade conflict is having a meaningful impact on demand for CAD beyond monetary policy considerations.
Source: Data TVC - Tradingview
This situation could also extend some of its effects to Mexico over the coming months. The dispute increases the risk that the United States adopts a tougher stance during the review of the USMCA, creating additional uncertainty around regional trade. In addition, Mexico is participating in discussions involving some of the sectors currently at the center of the dispute with Canada, meaning it cannot be ruled out that similar pressures could eventually emerge for Mexico as well. Under that scenario, the review of the trade agreement could increase the risk premium attached to both CAD and MXN.
As a result, while the recent escalation helps explain part of the weakness observed in the Canadian dollar, it also leaves the door open to indirect effects on Mexico. Unless meaningful diplomatic progress or stronger trade agreements emerge, a sense of caution may continue to dominate sentiment around USD/MXN. At the same time, with Canada being the primary target of the current measures, the dispute could continue to support more sustained buying pressure around USD/CAD in the months ahead.
USD/CAD Shows Signs of Growing Indecision
Source: StoneX, Tradingview
A Potential Trading Range Emerges: Price action in USD/CAD over recent months has started to reflect a lack of clear direction on the weekly chart. So far, the pair has been unable to develop a meaningful trend and has instead continued to trade within a broad range that contains most of the recent price activity. If prices remain within this structure, it may be difficult to see the beginning of a more defined trend, leaving the current range as the most important technical reference for the months ahead.
RSI: The RSI continues to trade near the 50 neutral level, a situation that reflects a balance between buying and selling pressure over the past 14 weeks. If this behavior persists, the sense of market indecision is likely to remain a relevant feature of the chart.
MACD: A similar scenario can be observed in the MACD, whose histogram continues to fluctuate around the 0 neutral line. This reading also reflects balance in the average strength of moving averages and reinforces the idea of a market that currently lacks a dominant direction.
Key Levels:
1.41388: Key resistance level that coincides with the upper boundary of the trading range and the 50% Fibonacci retracement level. Price action that manages to consolidate above this area could begin to favor a more dominant bullish bias and support the development of a more relevant upward structure in the months ahead.
1.38670: The midpoint of the chart, which coincides with an important equilibrium zone and the 50-period simple moving average. As long as prices continue to develop near this reference, the current neutral outlook may continue to dominate and reinforce the importance of the existing lateral range.
1.35543: Key support level located at the lower boundary of the range and below the chart's most relevant moving averages. Sustained price action below this area could signal a significant break of the current structure and open the door to a more dominant bearish bias over the coming months.
USD/MXN Begins to Challenge Its Dominant Downtrend
Source: StoneX, Tradingview
The major trendline enters a risk zone: One of the most relevant features of USD/MXN price action is the broad downtrend that has dominated the pair for several months. However, this structure has started to show signs of exhaustion and is increasingly moving into a risk zone. If selling pressure fails to regain momentum, the prevailing downtrend could lose relevance and give way to a period of greater indecision or even a more pronounced bullish bias in the months ahead.
RSI: The RSI continues to fluctuate around the 50 neutral level, reflecting a balance between buyers and sellers. This reading supports the possibility that the market may continue moving through a period of uncertainty and limited directional conviction.
MACD: A similar picture can be observed in the MACD, whose histogram remains very close to the 0 level, reflecting balance in moving average momentum and the absence of a dominant trend. As long as this dynamic persists, indecision may continue to play a significant role within the chart.
Key Levels:
18.15: Major resistance located near important highs from previous months and also aligned with the 200-period simple moving average. Price action that manages to consolidate above this level could signal the beginning of a more dominant bullish bias and support the formation of a new long-term uptrend.
17.60: A nearby barrier that coincides with the 50-period simple moving average and an important retracement zone on the chart. If price continues to trade around this level, a lack of clear direction could remain the dominant theme, potentially increasing the relevance of a broader trading range.
16.95: Key support located at the 2026 lows and considered the most important downside barrier on the chart. A sustained break below this level could restore momentum to the bearish bias and extend the downtrend as the dominant market structure over the coming months.
Written by Julian Pineda, CFA, CMT – Market Analyst
Foreign currency strategists at Crédit Agricole expects gradual Mexican Peso depreciation throughout 2027, despite recognising the support that higher yields give emerging-market currencies. The Mexican Peso is among the currencies Crédit Agricole expects to weaken even as much of the emerging-market sector withstands higher US interest rates.
The bank forecasts the US Dollar to Mexican Peso exchange rate (USD/MXN) at 18.00 in December 2026, rising to 18.25 in March 2027 and 18.50 in June.
Its targets then reach 18.75 in September and 19.00 in December 2027.
Against the bank’s 22 September reference rate of 17.27, the final target implies a 10% rise in USD/MXN, equivalent to roughly a 9.1% fall in the Peso’s Dollar value.
Crédit Agricole explicitly separates Mexico from its more favourable regional views:
“From an FX regional angle, we expect a slight appreciation of Asia vs the USD, and of CE4 vs the EUR, but expect more weakness in Latam (the COP and MXN in particular).”
Higher yields offer support, but currency losses remain a risk The bank acknowledges that emerging-market currencies have resisted pressure from rising US yields:
“Since the beginning of July, the US 10Y yield has increased by about 60bp. Yet, during the same period, our EM FX index appreciated vs the USD.”
On the interest-rate advantage over the US, it adds:
“Third, the average EM-US carry gap has remained decent, in spite of the recent increase in US short-term rates. This is because higher oil prices have also put a floor under EM short-term rates.”
Even so, the bank cautions:
“We do not expect a full-fledged appreciation of EM FX vs the USD.”
For Mexico, Crédit Agricole forecasts the policy rate remaining at 6.50% through December 2027, matching the current rate in Banco de México’s official figures.
The distinction between interest income and currency performance also featured in Rabobank’s warnings about Peso carry in May.
Our reading is that attractive yields alone do not invalidate Crédit Agricole’s forecast: investors can collect interest while losing value when Peso holdings are converted back into Dollars.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Over recent trading sessions, the Mexican peso has started to show signs of losing strength against the U.S. dollar. This can be seen in the performance of USD/MXN, which has gained more than 1.7% over the last three sessions, highlighting the dollar's renewed strength against the peso. Buying pressure has remained in place even as markets prepare for tomorrow's Banco de México policy decision, suggesting that expectations surrounding the event have not been sufficient to support a more consistent recovery in the Mexican currency. If this dynamic continues, buying pressure around USD/MXN could remain relevant in the sessions ahead.
What Is Expected from Banxico's Decision?
Tomorrow, Banco de México will announce its latest monetary policy decision. Despite maintaining one of the highest interest rates among major central banks, currently at 6.5%, markets are widely expecting policymakers to leave rates unchanged for a third consecutive meeting.
This expectation is largely driven by the recent evolution of inflation. Although price pressures remain present, inflation has slowed significantly over the past several months. After reaching a peak of 4.59% in March 2026, inflation has followed a consistent downward path, falling to 3.26% in August, a level that is now relatively close to Banxico's 3.00% target. This contrasts with the United States, where inflation continues to hold near 3.4%, still above the Federal Reserve's 2.00% objective. As a result, while markets expect Banxico to maintain a more stable stance, expectations for the Fed continue to point toward a more restrictive monetary policy.
Source: TradingEconomics
This divergence is becoming increasingly important because markets are now assigning more than a 70% probability to another Federal Reserve rate hike at the October meeting, potentially taking rates to the 4.25% area. Although Mexico continues to maintain a significantly higher policy rate than the United States, the discussion is no longer focused solely on current levels but rather on the direction each central bank may take in the months ahead.
This divergence is already beginning to show up in the bond market. Mexican 10-year government bonds continue to offer attractive yields around 9.3%, but those yields have started to moderate as investors increasingly expect Banxico to keep rates unchanged. By contrast, U.S. 10-year yields continue to move higher and remain slightly above 5.00%, supported by expectations of a more aggressive Federal Reserve.
Source: TradingEconomics
This development matters because a significant part of the peso's strength throughout much of 2026 was supported by the wide interest-rate differential with the United States. However, as markets continue to price in a more aggressive Fed and a more neutral Banxico, part of that relative advantage may gradually begin to shrink. While Mexican assets continue to offer higher yields, U.S. assets combine rising returns with a lower perceived level of risk, a combination that could continue to favor demand for U.S. dollars over the Mexican peso.
Under this backdrop, if Banxico once again confirms a stable policy stance tomorrow, the peso could continue to struggle to regain ground against the dollar. As a result, buying pressure around USD/MXN could remain a relevant market theme in the weeks ahead.
USD/MXN Technical Forecast
Source: StoneX, Tradingview
A new bullish move begins to take center stage: For most of the year, USD/MXN traded within a well-defined downtrend that served as the dominant technical structure on the chart. However, the recovery seen in recent sessions has produced a meaningful break above that trendline, with prices now challenging important resistance levels. If buying pressure remains in place, the pair could begin developing a new short-term uptrend in the weeks ahead.
MACD: The MACD histogram continues to develop above the 0 neutral line, a reading that suggests short-term moving-average momentum remains tilted to the upside. As long as this behavior persists, buying pressure could continue playing an important role in the market.
RSI: A similar picture can be observed in the RSI, which remains above the 50 neutral level, supporting the importance of the recent bullish momentum. However, the indicator has also moved above the 70 overbought threshold, suggesting that the pace of the recent advance has been significant and could leave room for short-term corrective pullbacks.
Key Levels:
17.65 – Major Resistance: A significant high from previous months that currently stands as the most important upside barrier on the chart. Sustained price action above this level could reinforce the dominance of buying pressure, support the formation of higher highs, and encourage the development of a more established bullish structure in the weeks ahead.
17.39 – Current Barrier: A level that coincides with the 200-period simple moving average and remains the nearest technical reference to monitor in the event of short-term bearish corrections.
17.15 – Key Support: An area that aligns with the 50-period simple moving average and the base of the former bearish structure. A move back toward this level could highlight a renewed lack of direction and favor the development of a broader trading range over the coming weeks.
Written by Julian Pineda, CFA, CMT – Market Analyst
The Mexican Peso appreciates against the US Dollar, testing two-year highs near 16.85 as the USD/MXN sets aside a strong US Nonfarm Payrolls report, which was ignored by the Peso’s bears. At the time of writing, the emerging market pair trades at 16.88, poised to extend its losses and challenge the April 2024 lows at 16.74.
USD/MXN Price Forecast: Technical OutlookPrice action suggests that the downtrend is poised to extend, as USD/MXN approaches two-year lows. Bearish momentum continues to increase as the Relative Strength Index (RSI) dives further into bearish territory.
The first support area is the 16.50-mile milestone. Below the latter, the next stop is May’s 2024 monthly low of 16.52, ahead of a test of the 2024 yearly low of 16.26. Once surpassed, the next area of interest will be the 16.00 figure.
For a bullish reversal, buyers must clear the 17.00 level to remain hopeful of reaching higher prices. Up next, the August 19 high of 17.07 emerges as the next resistance. A decisive breakout will expose the 50-day Simple Moving Average (SMA) at 1725, immediately followed by the 100-day SMA at 17.30. Above sits the 200-day SMA at 17.48.
USD/MXN Price Chart – Daily
USD/MXN daily chart 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.
The Mexican Peso appreciates by about 0.20% against the US Dollar, even as risk appetite deteriorated amid the escalation of the US-Iran conflict, which triggered a jump in energy prices. This exerted upward pressure on US bond yields on speculation that the Fed will raise rates. The USD/MXN trades at 16.99 after reaching a daily high of 17.04.
USD/MXN slips despite Iran escalation, Oil jump, Fed hike risksDevelopments during the overnight session pushed West Texas Intermediate (WTI), the US Oil benchmark, past the $85.00 threshold, following strikes by the US and Iran. Sentiment soured on the news, but not in the FX space, with most traders punishing the Greenback, as per the US Dollar Index (DXY).
.The DXY, which measures the buck’s value against a basket of six currencies, is down 0.25%.
Last week, hawkish remarks by Fed Chair Kevin Warsh weakened the Mexican currency, as USD/MXN rose 0.38%, closing at 17.03 on Friday. This increased bets that the US central bank will raise rates by 25 basis points at the September 16 meeting, according to Prime Terminal data.
The odds stand near 65% for a hike, a complete U-turn ahead of Warsh’s speech. Traders' eyes are set on a busy economic docket in the US. During the week, the release of ISM Manufacturing and Services PMIs will provide an update on economic activity, while a tranche of US jobs data, led by Nonfarm Payrolls for August, could confirm whether the labour market remains solid.
In Mexico, developments surrounding the USMCA free trade agreement are crucial for the emerging-market currency, as talks are set to continue. Nevertheless, US President Donald Trump has remained reluctant to extend the free trade agreement, signed during his first administration.
In addition, Mexico's economic docket will feature the August Consumer Confidence on September 3.
USD/MXN Price Forecast: Technical outlook
USD/MXN daily chartIn the daily chart, USD/MXN trades at 16.9994, keeping a bearish tone as spot holds beneath the medium-term descending trend line at 17.0838 and the clustered 50-, 100- and 200-day simple moving averages (SMA) around 17.3004. The failure to reclaim these overhead levels suggests the pair remains capped within a broader downtrend, while the Relative Strength Index (RSI) at 38.8 stays below the midline, hinting at persistent but not extreme selling pressure.
On the topside, initial resistance emerges at the medium-term downtrend line near 17.08, ahead of the broader SMA cluster around 17.30, which reinforces the prevailing bearish structure. A sustained move above these barriers would be needed to ease downside pressure, with the long-term descending trend line far higher near 18.12 marking a more distant cap on any recovery attempts.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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 trades around 16.91, extending a decline that has pushed the pair to levels last seen in 2024. Mexico's headline inflation accelerated to 3.26% in the first half of August, although the reading was below market expectations. Core inflation eased slightly to 3.93%, keeping the outlook for Banco de México more complicated than the headline CPI increase suggests. The USD/MXN exchange rate extended its decline on Monday, pushing below 16.95 as the Mexican peso continued to outperform the US dollar despite fresh inflation data showing a modest pickup in Mexican price pressures. USD/MXN is trading around 16.91 at the time of writing, according to the latest daily chart. The pair has now fallen from around 17.60 in early July and is testing its lowest territory since 2024.
The peso’s resilience is particularly notable because Monday’s inflation report did not deliver an obvious bullish catalyst. Instead, the move reflects a broader combination of persistent US dollar weakness, relatively high Mexican interest rates and improving confidence in the peso. The question now is whether sellers can force USD/MXN decisively below 16.90 or whether an increasingly stretched downtrend is due for a correction.
Mexico Inflation Rises to 3.26%, But Misses Forecasts Mexico’s latest inflation figures provided a mixed signal for the Mexican peso outlook. Annual headline inflation accelerated to 3.26% during the first half of August, up from 3.10% a month earlier. Consumer prices increased 0.10% during the period. However, the headline figure came in below the roughly 3.30% economists had expected. More importantly for Banco de México, underlying inflation moved in the opposite direction.
Core inflation eased to 3.93% from 3.95%, compared with expectations for an increase to around 3.99%. That distinction matters. Headline inflation is moving higher, but the softer core reading provides little evidence of a sudden broad-based acceleration in underlying price pressures. At 3.26%, headline inflation also remains within Banxico’s target range of 3% plus or minus one percentage point. The numbers therefore did little to dramatically alter expectations for Mexican monetary policy.
Banxico’s 6.5% Rate Keeps the Peso Attractive Interest-rate differentials remain an important part of the USD/MXN forecast. Banco de México left its benchmark interest rate unchanged at 6.5% earlier this month. Minutes from the meeting suggested policymakers could maintain the current rate for an extended period as they assess persistent inflation risks.
That relatively high yield continues to support the peso. Mexico’s economy has also held up better than some investors expected. Revised data released Monday showed GDP expanded 1.4% quarter over quarter in Q2, marking the strongest quarterly growth rate since early 2022. The economy grew 2.1% from a year earlier.
The combination of resilient growth and a relatively high policy rate gives investors fewer reasons to aggressively price near-term monetary easing. At the same time, the US dollar has struggled to regain sustained momentum, allowing USD/MXN sellers to remain firmly in control.
USD/MXN Technical Analysis: 16.90 Comes Under Pressure The daily chart paints a remarkably consistent bearish picture. USD/MXN has been forming a sequence of lower highs and lower lows since its July peak around 17.60. The decline accelerated during August, with the pair breaking below 17.20 and eventually losing the psychologically important 17.00 level.
Price is now sitting near 16.91.
Momentum indicators still favour sellers. The MACD remains below both its signal line and the zero level, confirming that the broader trend remains bearish.
There is, however, an important change taking place underneath the surface.The negative MACD histogram is becoming progressively smaller. That suggests bearish momentum is beginning to moderate even though the pair continues to make new lows. This creates an interesting setup around 16.90.
A clean daily break below 16.90 would reinforce the bearish structure and expose 16.80 as the next immediate target. Below there, the 2024 trading range suggests 16.60 could become increasingly relevant. For bulls, the first challenge is getting USD/MXN back above 17.00. A sustained recovery through that level could trigger a larger correction toward 17.10, followed by the stronger 17.20 to 17.30 resistance region.
USD/MXN Forecast: Can the Mexican Peso Keep Rising? The trend remains firmly in favour of the Mexican peso, but chasing USD/MXN lower is becoming progressively more difficult as the pair approaches levels not seen for roughly two years. The fundamental picture still provides support for the peso. Banxico’s policy rate remains relatively high, Mexican economic growth has proved resilient, and the US dollar has struggled to establish a sustained recovery.
Yet the latest inflation figures do not necessarily strengthen the case for another major leg higher in Mexican rates. Headline inflation rose, but core inflation actually moderated. That leaves 16.90 as the immediate battleground for USD/MXN.
A decisive break beneath this level could extend the selloff toward 16.80 and potentially 16.60. If 16.90 holds and the dollar begins recovering, a move back above 17.00 would be the first warning that the peso rally is entering a corrective phase. For now, the USD/MXN price forecast remains bearish while the pair stays below 17.00, but weakening downside momentum makes the current area increasingly important.
Why is USD/MXN falling?
USD/MXN has fallen as the Mexican peso benefits from relatively high Mexican interest rates and resilient economic data while the US dollar remains under pressure. The pair has dropped below 17.00 and is now testing its lowest levels since 2024.
What is Mexico’s inflation rate?
Mexico’s annual headline inflation increased to 3.26% in the first half of August 2026, while core inflation eased slightly to 3.93%. Headline inflation remains within Banco de México’s target range.
Will the Mexican peso continue to strengthen against the dollar?
The peso could extend its gains if USD/MXN breaks below 16.90 and US dollar weakness continues. However, the pair is approaching historically significant territory, while momentum indicators suggest selling pressure is beginning to moderate. That raises the possibility of a short-term USD/MXN rebound even if the broader trend remains bearish.
The USD/MXN extends its downtrend for the 14th straight day, down a minimal 0.08% as the Mexican Peso hovers near a 24-month low of 17.01 on Thursday. At the time of writing, the emerging-market currency pair trades below 17.05 as traders digest recent soft US inflation figures on the consumer and producer sides.
USD/MXN Price Forecast: Technical OutlookAfter clearing the 50- and 100-day Simple Moving Averages (SMAs) by the end of July, the USD/MXN accelerated its downtrend to yearly lows. Worth noting that the market structure of lower-highs and lower-lows is respected, and a breach below the 17.00 figure could open the door for further downside.
The Relative Strength Index (RSI) suggests the downtrend could be losing steam. Although USD/MXN drifts lower, the rate of change between sessions has narrowed, meaning that market participants remain reluctant to open fresh directional bets.
This could mean two things: first, that some consolidation lies ahead before the downtrend resumes to challenge the lower levels hit in 2024; or that USD/MXN could’ve found its floor and reversed course, aiming higher.
For the first scenario, if the USD/MXN clears below 17.00, this opens the path to challenge May’s 2024 monthly low of 16.52, followed by April’s 2024 low of the month at 16.26. Once those two levels are removed, the next support is at 16.00.
Conversely, if USD/MXN rises above the 50-day SMA at 17.38, followed by the 100-day SMA at 17.40, it could exacerbate a rally towards 17.50. On further strength, the next resistance is the 200-day SMA at 17.59.
USD/MXN Price Chart – Daily
USD/MXN daily chart 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.
Citi Mexico released the Expectations Survey on Monday, in which the central bank polled 35 economists to gather their forecasts for monetary policy, the USD/MXN exchange Rate, inflation expectations, and economic growth.
Citi’s survey shows that the majority of the economists polled expect monetary policy to remain steady at 6.50%. Seven of those 35 expect the next movement to be a rate hike, and six expect a cut further ahead. The rest expect policy to remain steady.
The USD/MXN exchange rate is expected to end at 17.90 in 2026, unchanged. For 2027, the consensus suggests a depreciation of the Mexican Peso (MXN), with the exchange rate seen at 18.50, with expectations of trading within a range of 17.40-19.95.
Regarding inflation expectations for July, the Consumer Price Index (CPI) is projected at 3.13% YoY, down from 3.37% in the previous survey, while core CPI is seen at 3.94% YoY, lower than the previous survey's 4.03%.
For the medium term, CPI is projected to end at 4.02% YoY, down from 4.09%, while Core CPI, the component, is expected to drop from 4.10% to 4%.
The Mexican economy is projected to grow 1.2% in 2026, up from 1.1% in the last survey, while for 2027, the projections show the Gross Domestic Product (GDP) ending at 1.8%, unchanged from the previous survey.
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.
USD/MXN daily price chart showing a multi-year rising trendline off the 2024 low, EMA cluster near 17.45, and RSI bullish divergence. Source: TradingView The Fed reported at 2:00 p.m. ET on July 29, and although July’s interest rate was already priced in before the meeting, traders were keeping an eye out for forward guidance into September. Unfortunately, there was no guidance and the Fed maintained a steady hold on interest rates, although there were three dissenters in the meeting who called for an immediate hike in interest rates. This call, made by three out of twelve FOMC voting members, gave some hope for a more hawkish Fed going into September 2026.
A higher Federal Reserve interest rate could strengthen the U.S. dollar, closing some of the interest rate gap between the peso and the USD, which could help turn price action in favor of the USD/MXN bulls, stirring a reversal and sending price upwards.
For a bullish reversal to be confirmed, we would have to see a daily close above the 200 EMA line at around 17.80, which leaves room for price to continue up toward the next key resistance at 18.09. Failure to achieve this daily close will invalidate the near-term bullish thesis and strengthen the downward argument.
Although it is unlikely, if the Fed surprises the market and lowers interest rates before the September 15 – 16 meeting, the carry gap remains enticing for peso bulls, which will trigger more shorting of the USD/MXN pair. This scenario can see price testing the 2024 support trendline around 17.21, and a break + daily candle close below that level opens the floor for more downside.
That being said, the major practical risk for USD/MXN bulls heading into August 6 is that Banxico decides to hike interest rates.
The Mexican peso is once again showing signs of short-term weakness. During today’s session, USD/MXN is up more than 0.5%, once again reflecting strength in the U.S. dollar.
For now, buying pressure remains in place as the market waits for the Federal Reserve decision and evaluates the possible dynamic between central banks. This is also being accompanied by doubts around new tariffs on Mexico, a factor that could also affect confidence in the Mexican peso. If the market confirms a more aggressive Fed and trade uncertainty remains in place, USD/MXN could continue to face a phase of indecision or even recovery over the next few trading sessions.
What is expected from the Fed? Today’s session will be marked by one of the most relevant events of the week: the Federal Reserve’s interest rate decision. For now, the market assigns a probability close to 66% that the U.S. central bank will keep interest rates unchanged.
However, a probability close to 33% of a possible rate hike today has also started to gain relevance. This shows that the market is beginning to consider a potentially more aggressive Fed for the next monetary policy meetings.
In addition, just hours before the decision, there is still a probability above 56% that the central bank will raise rates at the September 16 meeting. For this reason, the Fed’s message will be key to determining whether expectations of higher rates in the United States gain strength over the coming months.
Source: CMEGROUP
For its part, the Bank of Mexico has not given clear signals that it could adopt a more aggressive stance in the coming months. In fact, Mexican monetary policy remains focused on avoiding relevant changes to interest rates, which makes sense given the recent moderation in inflation.
After reaching a 2026 high of 4.59% in March, annual inflation in Mexico fell to 3.37% in the June data. This reduction is important, as the rate remains close to the central bank’s 3.00% annual target and reduces pressure for Banxico to adopt a more restrictive stance.
Source: TradingEconomics
This scenario is relevant because the current 6.5% rate in Mexico remains attractive compared with other central banks and maintains an important differential against the 3.75% rate in the United States. However, if the Fed starts to show a more consistent possibility of new hikes, this differential could narrow and reduce the relative appeal of peso-denominated investments.
Therefore, if today’s decision confirms a more aggressive outlook from the Federal Reserve, dollar-denominated investments could gain greater appeal. This would limit the Mexican peso’s ability to recover and could maintain a phase of indecision or buying pressure in USD/MXN over the next few sessions.
Does the threat of new tariffs remain in place? For several sessions now, it has been known that the United States decided to apply an additional 10% tariff on Mexican products under Section 301. In principle, this measure applies to Mexican goods that are not covered by the USMCA trade agreement.
This event is relevant because Mexico maintains a high commercial dependence on the United States. By the end of 2025, nearly 80% of Mexican exports were directed to that country, meaning the impact of new tariffs could be more sensitive compared with other economies.
Although Mexico remains focused on strengthening negotiations to avoid additional tariffs or remove the ones already in place, no relevant progress has been seen yet suggesting that the U.S. government is willing to move away from these measures. This uncertainty could affect the perception of economic stability in Mexico over the coming months.
For this reason, if no positive updates emerge from negotiations, the appeal of peso-denominated investments could remain limited. This would add another pressure factor for USD/MXN, maintaining a possible phase of indecision over the next few trading sessions.
Technical forecast for USD/MXN
Source: StoneX, Tradingview
Sideways range remains relevant: For several months, USD/MXN has continued to move within a broad long-term sideways range. Despite some movement attempts, neutrality remains the dominant feature on the chart. For now, this structure remains the most important technical reference. If price fails to move consistently away from neutral zones, the sideways range could continue to reflect a lack of direction over the next few trading sessions.
RSI: At the moment, the RSI remains close to the neutral 50 level. This indicates a balance between buying and selling impulses in the average of the last 14 sessions. If the indicator continues to behave this way, neutrality could remain relevant on the daily chart.
MACD: The MACD remains close to the neutral 0 line, suggesting balance in the strength of short-term moving averages. This reading also reinforces the possibility that USD/MXN could continue to show a neutral phase in the short term. Key levels:
17.67 – Main resistance: This recent high zone coincides with the 200-period simple moving average. Sustained movements toward this level could mark the beginning of a more consistent buying bias and open room for a possible short-term bullish trend line.
17.41 – Current barrier: This relevant retracement level from recent weeks is also an important neutral zone and coincides with the 50-period simple moving average. If price fails to move away from this reference, the indecision phase could be reinforced and the sideways range could extend as the dominant structure.
17.10 – Relevant support: This 2026 low zone remains the main bearish barrier for now. Movements toward this level could bring the selling bias back into focus and open room for a continuation of the descending channel that had remained the dominant structure in previous months.
Written by Julian Pineda, CFA, CMT – Market Analyst
USD/MXN sits at 17.47988, drifting sideways within the shaded 17.50 zone. Source: TradingView The US dollar has drifted a little bit lower against the Mexican peso, and while the interest rates in America are fairly high by historical standards, traders still get paid to hold pesos, not dollars here. So, this, too, is following the interest rate differential path. The 50-day EMA is right at the 17.43 level, and of course, we’ve seen some sideways action between 17.35 and 17.60 over the last several weeks.
Looks like more of the same here. 17.50 seems to be a little bit of a magnet for price, but ultimately this is a market that’s just trying to figure out what to do longer term. This pair does get to be choppy for a while. This is part of the reason why these pairs attract so many inflows at times to use for that overall interest rate differential payment at the end of the day. Right now, though, there are so many questions involving the Middle East, the global economy, and everything else; it’s not a surprise that we’re somewhat stagnant.
Although USD/MXN has declined more than 0.8% over the last few sessions, favoring the Mexican peso, the broader chart still does not show a clear direction. For now, the Mexican currency remains in an important neutral phase, in a context where the renewed threat of tariffs in North America and the lack of strong signals continue to limit confidence.
In this scenario, a phase of indecision could continue to be part of USD/MXN movements over the next few trading sessions, at least until relevant economic data is released.
Is the Mexican peso failing to stabilize confidence? Over the last few sessions, the relationship between the U.S. dollar and the Mexican peso has continued to be shaped by bond market dynamics. In both countries, yields have shown consistent increases, with Mexico’s 10-year bonds above 9.00% and U.S. 10-year bonds above 4.6%.
This differential still provides some relative appeal for peso-denominated investments, especially compared to dollar-denominated assets. This has been one of the reasons why the Mexican peso has not lost value consistently against the dollar in recent months. In addition, the difference between both central banks’ reference rates, with 6.5% in Mexico versus 3.75% in the United States, remains an important factor for the pair’s behavior.
Source: TradingEconomics
However, this relative appeal has not been enough to generate dominant strength in the Mexican peso. Part of this is explained by the moderation of inflation in Mexico, which has led the Bank of Mexico to maintain a more neutral tone in recent comments. For now, monetary policy appears focused on waiting and avoiding relevant short-term changes.
At this point, the dynamic could start to shift. While Banxico maintains a more neutral outlook, the Federal Reserve could still adopt a more aggressive tone over the coming months. According to the CME Group probability table, for the September 2026 decision, there is still a probability above 54% that the United States could deliver its first rate hike of the year, taking the rate toward a new area near 4.00%.
Source: CMEGROUP
This shift is relevant because a more aggressive Fed stance could reduce the rate differential that has favored Mexican bonds and, by extension, the Mexican peso for several months. At the same time, if dollar-denominated assets begin to offer higher yields, they could become more attractive than peso-denominated investments, which are usually perceived as riskier.
For this reason, the possibility of a more aggressive Fed continues to generate uncertainty and limits a clearer recovery in the peso. If Banxico’s comments continue to point to a neutral stance and the market maintains expectations of higher rates in the United States, the phase of indecision could remain relevant in USD/MXN over the coming weeks.
Could new tariffs have an impact? Recently, the possibility of renewed trade tensions in North America gained traction again after the United States signaled new tariffs on several Canadian products, with rates of up to 50% in the short term.
Although this event does not directly affect the Mexican economy, it does serve as a warning signal. In previous rounds of trade tension, both Canada and Mexico were exposed to tariff measures, and for now, there have been no major advances in negotiations related to the USMCA between Mexico and the United States.
This point is relevant because close to 80% of Mexican exports are directed to the United States. For this reason, any trade escalation that includes Mexico could quickly affect confidence in the Mexican peso, as has already happened during previous periods of tension. If more aggressive comments or measures against the Mexican economy emerge, USD/MXN could start to show more relevant buying pressure over the coming weeks.
Technical forecast for USD/MXN
Source: StoneX, Tradingview
Sideways range continues to dominate: For several months, USD/MXN has continued to trade within a broad long-term sideways range. Despite price movement attempts, neutrality remains the dominant feature on the chart. For now, this range remains the most important technical structure to watch and could continue to reflect a lack of direction over the next few trading sessions.
RSI: Now, the RSI line remains close to the neutral 50 level. This indicates a balance between buying and selling impulses in the market. This reading confirms that the phase of indecision remains relevant for short-term USD/MXN movements.
TRIX: The TRIX line shows a similar dynamic, with movements close to the neutral 0 level. This reflects balance in the strength of long-term exponential moving averages. As long as this behavior continues, price neutrality could remain important over the next few sessions. Key levels:
17.71 – Main resistance: This recent high zone coincides with the 200-period simple moving average. Sustained movements toward this area could mark the beginning of a more consistent buying bias and open room for the possible formation of a bullish trend line over the coming weeks.
17.39 – Current barrier: This relevant retracement level from recent weeks and important neutral zone coincides with the 50-period simple moving average. If price fails to move away from this level, the phase of indecision could be reinforced and the sideways range could extend over the medium term.
17.10 – Relevant support: This area corresponds to the 2026 lows and remains the main bearish barrier for now. Moves toward this level could bring the selling bias back into focus and open the way for a continuation of the descending channel that had remained the dominant structure months ago.
Written by Julian Pineda, CFA, CMT – Market Analyst
The Mexican peso continues to face difficult trading sessions. Over the last 3 trading sessions, average USD/MXN movements have posted a gain of more than 1.00% in favor of the U.S. dollar, which continues to reflect weakness around the peso.
This scenario did not fully change after the release of Mexico’s inflation data, which showed a significant decline. This new reading could start to affect expectations for higher interest rates for longer, which in turn could limit the strength of the Mexican peso. In this context, USD/MXN could continue to show a phase of indecision or even more relevant buying pressure over the next few sessions.
Inflation day for Mexico During today’s session, Mexico’s annual average inflation data was released. Initially, the consensus expected a reading near 3.52%, but the official figure surprised to the downside and came in at 3.37%, below expectations and at its lowest level in the last 5 years.
This data is relevant because it marks a significant decline compared to previous months. It also confirms a downward trend in the consumer price index, which has been falling from this year’s high near 4.59%. With this new release, inflation is moving increasingly closer to the central bank’s target of around 3.00%.
Source: TradingEconomics
This scenario could be important for the Mexican peso’s movements, as one of its main advantages against the U.S. dollar has been the wide rate differential between both central banks. While the Bank of Mexico keeps its interest rate around 6.5%, the Federal Reserve maintains a benchmark rate near 3.75%.
For months, this differential has positioned the bond market and Mexican peso-denominated investments as potentially more attractive options compared to dollar-denominated investments. To some extent, this has helped sustain demand for the Mexican peso.
Source: TradingEconomics
However, the outlook could start to change. The latest inflation release marks an important shift in the price dynamic and could reduce the need for additional interest rate increases in Mexico. It could even gradually open room for rate cuts from the current 6.5% level over the coming months.
For this reason, the latest data could point to a calmer Bank of Mexico, with no need to deliver significant additional interest rate increases.
When comparing this potential dynamic with the Federal Reserve, the scenario is different. In the United States, inflation has not shown such significant declines, and CME Group’s probability table still points to a probability above 51.00% that, at the September 16 decision, the interest rate could move from the current 3.75% level toward a new 4.00% reference.
This suggests that the Federal Reserve could still maintain an aggressive stance over the coming months.
Source: CMEGROUP
This point is key because an important difference between both central banks is starting to emerge. While the market could begin to price in a calmer Banxico, the Federal Reserve remains close to a more aggressive scenario.
This combination could reduce the rate differential that has supported the Mexican peso over the last few months. For that reason, rather than strengthening the peso, the latest inflation data could suggest that, over time, peso-denominated investments may become less attractive compared to U.S. dollar-denominated investments.
If this central bank dynamic continues, the peso could struggle to recover ground consistently in the medium term. This could reflect not only a phase of indecision in USD/MXN, but also more relevant buying pressure over the coming trading weeks.
Technical outlook for USD/MXN
Source: StoneX, Tradingview
Sideways range stronger than ever: Since February 2026, USD/MXN has not managed to define a clear direction or consolidate a more structured trend line. This has led to the formation of a relevant sideways range, with resistance near 17.92 and support around 17.10. As long as the pair fails to break out of these barriers, it will be difficult to confirm a firmer trend. For this reason, indecision could remain the dominant technical pattern over the coming trading weeks.
RSI: movements do not show significant short-term strength and remain close to the neutral 50 area. This suggests a balance between buying and selling impulses in the market, reinforcing the importance of the current indecision phase.
MACD: shows a similar reading, with the histogram remaining close to the 0 level. This reflects balance in the strength of short-term moving averages and confirms that indecision is still present in average USD/MXN movements. If this behavior persists, neutrality could remain relevant over the next few sessions. Key levels:
17.90 – Main resistance: This recent high zone remains the main bullish barrier above the 200-period simple moving average. Sustained moves toward this zone could mark the beginning of a more consistent buying bias and open room for the possible formation of a bullish trend line over the coming weeks.
17.52 – Current barrier: This is a relevant retracement level from recent weeks and an important neutral zone to watch. If price fails to move away from this level, the indecision phase could be reinforced, and the sideways range could extend as the dominant chart structure in the medium term.
17.10 – Relevant support: This zone corresponds to the 2026 lows and is currently the main bearish barrier. Moves toward this level could bring the selling bias back into focus and give continuity to the descending channel that remained the dominant structure months ago.
Written by Julian Pineda, CFA, CMT – Market Analyst
The pair between the Peso and the Dollar (USD/MXN) is currently consolidating as traders await further triggers from the macroeconomic front. Current Setup and Live Chart The USD/MXN pair is currently trading in a consolidation between 17.1016 and 17.6417, with the former acting as the price floor and the latter acting as the ceiling. This consolidation comes as traders juggle between U.S. interest rate expectations, global risk sentiment, and Mexico’s relatively high interest rates.
The pair has seen the recent uptick rejected at the price ceiling following the relatively dovish comments from new Fed Chair Kevin Warsh at the Sintra Central Banking Forum. While these comments and the downbeat NFP data have not heavily dented the U.S. dollar’s recent strength, they have contributed to the counterbalance between the U.S. Dollar and the Mexican Peso.
Macro Drivers of the USD/MXN 1) Interest Rate Differentials
The Mexican Peso has one of the highest real interest rates among emerging market currencies. This has led to carry trades between the USD and the Mexican Peso. Now that the Fed has indicated it will adopt a cautious stance to interest rate adjustments, interest rate expectations in the U.S. have been repriced lower. The high interest-rate differential between the two currencies continues to promote foreign bond investments, carry-trade strategies, and Peso-leaning institutional capital flows.
2) Oil Prices
The Peso is a commodity currency that has a positive correlation to oil prices. During the oil price shock, the Peso gained sharply against the U.S. dollar despite safe-haven flows into the dollar. The Peso remained stable and maintained a strong 25% gain from February 2025 to date against the greenback.
3) Fed Rate Expectations
Expectations for the Federal Reserve’s interest rate policy continue to be a key driver for the pair’s price movements. Now that the Fed is shifting to a data-dependent approach to monetary policy, U.S. data will become important drivers of price movements in the USD/MXN pair. The pair is expected to remain sensitive to the direction of U.S. Treasury yields. Declining yields will encourage demand for the higher-yielding Peso, while rising U.S. bond yields will shift focus towards the USD.
4) Nearshoring
Mexico continues to benefit from the nearshoring trend. Nearshoring is the process by which investments shift to countries with lower production costs. Mexico has relatively lower production costs for companies in the United States, as wages are lower and the operating environment has a lower cost of moving than the United States. This nearshoring investment potential continues to support foreign direct investment into the Mexican market, which requires foreign capital denominated in U.S. dollars to be converted into the local Peso. This also boosts Mexico’s industrial production, export growth potential, and employment, all of which together provide confidence in Mexico’s economic outlook.
Price Catalysts (Near Term) 1) U.S. economic data: U.S. data, especially those around employment, labor market conditions and inflation, look set to assume greater importance now that the Fed is shifting towards a data-dependent approach to monetary policy. Stronger-than-expected US data are supportive of USD/MXN. In contrast, downbeat data will limit near-term recovery potential, as the pair is now in a consolidation phase following a 16-month downtrend.
2) Global risk sentiment: The USD/MXN is a pair that is highly sensitive to global risk sentiment. The greenback benefits from risk aversion, while the Peso thrives when investor appetite for risk is high.
3) Mexican inflation and central bank expectations: the market will keep watch over Mexico’s data, especially those around inflation and Banxico’s rate policy. Higher domestic inflation will support the Peso, as it increases the risk of a rate hike from the Mexican central bank.
USD/MXN Weekly Forecast Scenarios Base case: neutral to bearish, as the interest rate differential and the dovish shift of the Fed should allow for a further retracement from the range top, even as a resilient USD prevents a downside continuation.
Bull case: stronger-than-expected U.S. macroeconomic data and rising U.S. bond yields. Furthermore, any conditions that lead to a deterioration in global risk sentiment can trigger a safe-haven flight to the U.S. Dollar, drawing capital away from emerging-market currencies. In this situation, the pair will break out of the consolidation and aim for the 18.15-18.60 price range.
Bear case: softer-than-expected U.S. inflation, global risk-on sentiment, strong Mexican data (especially local inflation), and falling U.S. bond yields will trigger the bear case scenario. Add in the carry trade dynamics, and we could see a continuation of the downward trend in place since February 2025. A move toward 16.60 cannot be ruled out under this scenario.
USD/MXN Technical Outlook The pair is trading within a consolidation. 17.1016 is the range floor, and 17.6473 is the range ceiling. Currently, price is retracing after rejection at the range ceiling. The range’s floor is next in line, and if the bears succeed in eroding this support, a continuation of the downtrend towards 16.6272 (the 28 July 2023 and 17 May 2024 lows) could be on the cards.
Fig 1: USD/MXN daily chart showing key price levels (snapshot taken on 7 July 2026) On the flip side, recovery in the pair follows an uncapping of the 17.6473 range ceiling. This move lines up the 18.1547 high of 18 April 2024 with the 31 March 2026 high as the next upside target. A further upside extension brings in 18.6053 as the next target in line for the bulls.
The Mexican Peso remains one of JP Morgan's preferred emerging-market currencies, with the bank arguing that improving domestic growth, attractive carry and resilient trade flows continue to support MXN.
USD/MXN is forecast to ease from current levels, with JP Morgan targeting 17.35 by September 2026, 17.30 by December, 17.30 by March 2027 and 17.30 by June 2027.
JP Morgan analysts say Mexico's economic outlook has improved after a weak start to the year.
"Some green shoots point to a more benign picture for growth in 2H26."
The bank notes that stronger-than-expected April GDP, a rebound in construction activity and robust services growth have prompted it to lift its 2026 GDP forecast from 1.0% to 1.2%.
JP Morgan also expects Banxico to keep its benchmark interest rate unchanged at 6.5% over the coming year as inflation remains comfortably within target.
The bank believes the successful conclusion of the latest USMCA review also removes an important source of uncertainty for investors.
Rather than reopening the agreement, the US, Canada and Mexico agreed to continue negotiations under the existing framework, preserving Mexico's privileged access to US markets.
Carry Trade Still Supports the Peso
JP Morgan argues the Peso's biggest strength remains its attractive yield.
"The structural view for MXN remains constructive, anchored by decent volatility-adjusted carry."
With market volatility easing after the Middle East conflict and Mexico's balance of payments remaining resilient, the bank believes the Peso should continue attracting international capital.
