The Mexican Peso lost ground against the US Dollar, with USD/MXN rising over 0.25% to 16.93, despite the US Dollar Index edging lower against a basket of six currencies [1]. This movement occurred during thin liquidity conditions as US financial markets were closed for Labour Day [1]. An escalation in the Middle East conflict, specifically US retaliation against Tehran's attack on oil vessels, pushed oil prices higher, negatively impacting the US Dollar [1].
US inflation expectations continued to rise, leading investors to price in a nearly 61% chance of a 25-basis-point rate hike by the Federal Reserve at its September 15-16 meeting [1]. Last week's stronger-than-expected Nonfarm Payrolls report for August supported Fed Chair Kevin Warsh's assertion that the jobs market is 'consistent with full employment,' although the US Dollar's strength faded as investors await upcoming US inflation data on Thursday and Friday [1].
In Mexico, private economists expect interest rates to remain unchanged for the foreseeable future, projecting the main reference rate to stay at 6.50% for the rest of 2026 and throughout 2027 [1]. Analysts forecast the Mexican Peso to depreciate to 17.50 by the end of 2026 and to 18.07 by the end of 2027 [1]. Upcoming Mexican economic data includes August's 12-month inflation, expected at 3.3% (up from 3.12% on September 9), and July's Industrial Output, forecast at 0.1% MoM (down from 0.2%), with annual output projected to rise from 1.7% to 1.8% [1].
Technically, USD/MXN trades at 16.9293, maintaining a bearish near-term tone as it remains below the 50-, 100-, and 200-day simple moving averages clustered around 17.2401 and beneath descending trend lines, with the nearest resistance at 17.08 and broader resistance at 17.24 [1]. The Relative Strength Index (14) is at 36.5, indicating weak momentum and persistent downside pressure, though the latest slide is moderating [1]. Immediate support is at 16.89, with a break lower exposing further weakness, while holding above this level could lead to short-term consolidation within the broader bearish structure [1].
CONCLUSION
The Mexican Peso's recent weakness against the US Dollar is driven by rising US inflation expectations, higher oil prices, and anticipation of key US economic data. Analysts expect the Peso to depreciate further over the next two years, while technical indicators suggest continued downside pressure in the near term. Market participants are closely watching upcoming inflation and industrial output data for further direction.