Mexican Peso dips as US Core PCE renew Fed hawkish bets
- USD/MXN rises as sticky PCE boosts Fed hike expectations.
- Banxico lifts growth forecast but delays inflation convergence timeline.
- USMCA uncertainty and Warsh speech shape next Peso catalysts.
The Mexican Peso loses some traction against the US Dollar on Wednesday as traders seem confident that the Federal Reserve could raise interest rates toward the end of the year, following a red-hot inflation report. The USD/MXN trades at 16.95, after reaching a daily low of 16.92.
USD/MXN drifts high as US inflation offsets Banxico’s stronger growth outlook
The Greenback recovered as the Core PCE in July came aligned with estimates and matched June’s reading of 3.3% YoY. Following suit, the PCE headline reading for the same period held steady at 3.7% YoY for the second straight month, exceeding forecasts of 3.6%.
Both readings revealed that the disinflation process stalled and increased the chances of seeing higher interest rates in the US. Money markets had priced in a 74% chance of a 25-basis-point (bps) interest rate increase at the July meeting, according to Prime Terminal.
US Durable Goods Orders —which comprise goods meant to last three years or more—rose by 1.1% in July, exceeding forecasts and June’s 0.5% reading, boosted by transportation equipment.
Across the southern border, the Bank of Mexico (Banxico) released its Quarterly Report for Q2 2026, in which the institution updated its forecasts for several economic indicators.
Regarding economic growth, Banxico expects GDP to rise from 1.1% to 1.5%. Meanwhile, headline inflation is projected to converge to the 3% goal by Q4 2027, a slower pace than in the previous report, the central bank revealed.
Regarding core inflation, is forecast at 3.5%, up from 3.4% and is also expected to reach Banxico’s 3% goal towards the end of 2027. In the meantime, the central bank noted that economic activity continues to slow down due to uncertainty surrounding the review of the USMCA.
Ahead, the US economic docket will feature Initial Jobless Claims on Thursday, followed by the Chair Kevin Warsh's speech at the Jackson Hole Symposium.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 16.9563, extending the pullback and holding below the cluster of simple moving averages (SMA) grouped around 17.3219, which keeps the near-term bias bearish. Price remains well under a medium-term descending resistance trend line drawn from 18.1651, while the Relative Strength Index (RSI) at 31.65 hovers just above oversold territory, hinting at weakening downside momentum but not yet signaling a reversal.
On the topside, initial resistance is located at the triple SMA area near 17.3219, where a daily close above would be needed to ease immediate selling pressure. Further up, the descending trend structures strengthen the cap, with the medium-term line around 18.1651 followed by a longer-term downtrend reference near 21.0808, leaving the pair exposed to fresh lows as long as it trades beneath these levels and lacks clearly defined support nearby.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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