On Monday, the Mexican Peso managed to claw back some value against the U.S. Dollar, despite looming tariffs. President Donald Trump had announced a 25% tariff on Mexican imports to the U.S., set to kick in on Tuesday. Yet, as markets digested this, the Peso rose slightly against the backdrop of mixed U.S. economic data, which suggested a potentially flat economic performance in the first quarter of 2025, as forecasted by the Atlanta Fed’s GDPNow model. Currently, the USD/MXN pair is trading at 20.41, marking a 0.41% dip.
Over the previous weekend, U.S. Commerce Secretary mentioned that tariffs on Mexico and Canada were scheduled to start on Tuesday, although the final decision on the 25% levy remained pending. Should these tariffs be enforced, they could enhance the demand for the dollar among traders, thereby likely pushing the USD/MXN rate upwards. Conversely, suspending the tariffs might encourage a relief rally for the Peso, potentially further lowering the rate.
In terms of economic data from Mexico, S&P Global reported an eighth consecutive month of manufacturing contraction. Business confidence has also taken a hit, as highlighted by the continued decline tracked by the National Statistics Agency (INEGI), further painting a bleak economic landscape.
According to a survey by Banco de Mexico (Banxico), private sector economists foresee growth below 1%, with steady inflation expectations.
On the other hand, U.S. manufacturing data presented a mixed bag. S&P Global’s figures showed an expansion from January, whereas the Institute for Supply Management (ISM) recorded a slight dip, though it still indicated growth.
Analysis of Daily Market Trends: Mexican Peso’s Rise Despite Weak Data
Mexico’s Manufacturing Purchasing Managers’ Index (PMI) slipped to 47.6 from 49.1 in February, according to S&P Global. Pollyanna de Lima, Economics Associate Director at S&P Global Market Intelligence, attributed the decline to persisting weak demand and growing cash flow pressures. Meanwhile, Business Confidence fell by 1.4 points to 50.1, a significant drop from 51.5, and significantly down by 4.9 points compared to last year. However, the index has held above 50 for 25 months, indicating expansion despite recent declines.
Banxico’s recent survey has adjusted 2025’s GDP growth projection to 0.81% from 1%, with expectations for headline inflation to end at 3.71%, down slightly from 3.83%. Meanwhile, core CPI remains steady at 3.75%.
Economists project that the USD/MXN rate will settle at 20.85 by the end of 2025, a decrease from the previous 20.90 prediction. For 2026, a depreciation of the Peso over the 21.30 mark, earlier anticipated in the January forecast, is expected.
The ISM’s U.S. Manufacturing PMI indicated that business activity in February steadied at 50.3, a dip from 50.9, and fell short of economists’ expectations of 50.5. Conversely, S&P Global noted that manufacturing activity increased to 52.7, up from 51.2, surpassing the forecast of 51.6.
USD/MXN Technical Perspective: Peso Gains as Rate Slips Below 20.50
While the USD/MXN uptrend persists, the pair has been stuck within the 20.20 to 20.70 range over the last 18 days, signaling buyers’ hesitance to drive prices higher. In the short term, momentum seems to favor the downside, as shown by the Relative Strength Index (RSI) turning bearish.
For a continuation of this bearish trend, USD/MXN would need to dip below the 100-day Simple Moving Average (SMA) at 20.30. Clearing this level could see it drop to 20.00, with the next target at the 200-day SMA at 19.50. Conversely, for buyers to regain control, they must push past 20.50 and clear the recent peak of 20.71 from February 6, before challenging the February 3 high of 21.28.
FAQs on Banxico
Banxico, or the Bank of Mexico, serves as the nation’s central bank, dedicating itself to preserving the value of the Mexican Peso by setting monetary policy aimed at maintaining stable, low inflation—ideally at 3%, which is the midpoint of its 2% to 4% target range.
Banxico primarily uses interest rates to guide its monetary policy. When inflation exceeds targets, the bank raises rates to cool economic activity, which tends to support the Peso by attracting investment due to higher yields. Conversely, lowering rates can lead to a weaker Peso. The difference between Banxico and the U.S. Federal Reserve’s interest rates significantly influences this dynamic.
Banxico holds meetings eight times a year, often after the Federal Reserve sessions, allowing them to adapt or anticipate monetary policy changes. For instance, post-Covid-19, Banxico preemptively increased rates before the Fed to buffer the Peso from potential depreciation and to mitigate capital outflows that could destabilize the economy.
