The Mexican Peso erases some of its earlier gains against the US Dollar on Tuesday as the US and Iran launched successive strikes against each other, souring risk appetite and weighing on the emerging market currency. The USD/MXN trades at 16.99, virtually unchanged.
USD/MXN stalls as risk appetite fades before US jobs data
Geopolitics are driving price action in the financial markets. The White House ordered attacks near the shores of the Strait of Hormuz, aimed to diminish Iran’s capabilities to disrupt sailing, near the Strait. Iran retaliated as Fars reported the launching of retaliatory attacks against US bases and interests.
This pushed the Greenback higher, as measured by the US Dollar Index (DXY). The DXY, which measures the buck’s performance against six currencies, is up 0.27% at 99.68.
Data from the US indicated that the Fed could raise rates, as the labor market remains solid. Business activity in the manufacturing sector, although cooling, remains solid, according to the ISM.
The ISM Manufacturing PMI in August continued in expansion territory, down from 55.6 to 54.6, but missing forecasts of 55.2. The JOLTS job openings survey revealed that hiring was weaker than the forecast of 7.3 million, at 7.217 million.
Ahead, the US economic calendar includes the Fed’s Beige Book, jobs data, the ISM Services PMI for August, and the Nonfarm Payrolls report on September 4.
In Mexico, the schedule was light as S&P Global revealed the August Manufacturing PMI, which contracted from 51.3 in July to 49.8. Besides this, traders are eyeing the August Consumer Confidence on September 3.
The Bank of Mexico – also known as Banxico- revealed its survey of private economists. The poll showed that most analysts trimmed their 2026 inflation projection from 4% to 3.90% by the end of 2026, and their 2027 projection to 3.84%. Underlying measures of inflation are expected to drop from 4% to 3.99% by the end of the year, and for 2027 are expected to dip from 3.86% to 3.80%.
The survey showed that the economy is expected to grow by 1.30% in 2026 and 1.80% in 2027. The USD/MXN exchange rate is projected to end at 17.50 by the end of the current year, and at 18.05 by the end of 2027.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 17.0000, retaining a bearish tone as spot holds below the triple simple moving average cluster around 17.2893 and the shorter-term descending trend-line barrier near 17.3217. Price location under these overhead levels suggests rallies remain capped, while the Relative Strength Index (14) at 38.9 stays below neutral, hinting at weak but not extreme downside momentum after the recent bounce off late-August lows.
On the topside, initial resistance is seen at the downtrend line coming from 18.1651, now projecting around 17.3217, with the grouped 50/100/200 simple moving averages clustered near 17.2893 reinforcing this supply zone. On the downside, there is no nearby technical floor until the longer-term support reference at the prior trend-line break around 15.4181, leaving the pair vulnerable to further declines should sellers push decisively away from the 17.00 handle.
(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.
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