• USD/MXN advances 0.47% to 18.49 despite broader US Dollar weakness.
• US-Mexico trade negotiations face obstacles over automotive, steel and aluminum tariffs.
• December Fed hike odds reach 89% ahead of key Mexican economic data.

The Mexican Peso (MXN) losses ground against the Greenback on Friday amid broader US Dollar (USD) weakness, as Mexico’s economic docket is absent, leaving traders leaning into US dynamics. At the time of writing, USD/MXN trades at 18.49, up 0.47%, on track for the sixth consecutive weekly gain.

USD/MXN climbs toward 18.50 as stalled trade negotiations undermine Peso sentiment

Talks between the US and Mexico on a trade deal and tariff reductions have stalled, as the Wall Street Journal reported that Commerce Secretary Howard Lutnick is opposing reductions in 25% tariffs on Mexican autos and 50% levies on steel and aluminum.

Meanwhile, Mexico's deputy trade minister, Luis Rosendo Gutierrez, told the Journal that negotiations were making progress. A swift resolution on this matter would be positive for the Mexican Peso, bringing some stability with its largest trading partner.

In the US, Industrial Production in September rose 0.7% MoM, exceeding estimates of 0.4% and the prior month’s 0.1% expansion. Aside from this, the docket was scarce on Friday; traders are still digesting this week’s inflation data, which has increased the chances of a December rate hike by the Federal Reserve.

Earlier, Fed Chair Kevin Warsh discussed the global economy, the AI boom, and yields at the IMF meeting in Bangkok. On monetary policy, he said, “We made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago.”

For the October meeting, the chances of a hike collapsed to 14%, down from above 50%, on the initial reaction to the US CPI, according to Prime Terminal. For the December meeting, the probability of a 25-basis-point increase is 89%.

Next week, Mexico’s economic docket will be busy with Retail Sales, the release of mid-month inflation, jobs data and the Economic Activity indicator, usually a prelude of GDP. In the US, the schedule will be light, featuring housing data, Initial Jobless Claims and Flash PMIs.

USD/MXN Price Forecast: Technical outlook

In the daily chart, USD/MXN trades at 18.4915, extending its advance well above the clustered simple moving averages around 17.4234 and the former downward trend-line resistance now turned support near 18.1200, which together suggest a bullish near-term bias. The pair is holding far from the horizontal floor at 16.8866, while the 14-period Relative Strength Index at 71.0 edges into overbought territory, hinting that upside momentum remains strong but increasingly stretched.

On the downside, immediate support emerges at the recent breakout area around 18.1200, followed by the grouped 50-, 100- and 200-day simple moving averages near 17.42, which reinforce the broader bullish structure if tested. A deeper pullback would expose the horizontal base at 16.89, but as long as price holds above these underlying demand levels, USD/MXN would likely remain supported on dips despite the overbought signal from momentum.

(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.

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.