The Mexican Peso lost ground against the US Dollar on Wednesday, with USD/MXN trading at 16.95 after hitting a daily low of 16.92, as traders grew confident that the Federal Reserve could raise interest rates toward the end of the year. This sentiment was driven by a robust US inflation report, where the Core PCE for July matched estimates and June’s reading at 3.3% year-over-year, while the headline PCE held steady at 3.7% year-over-year for the second consecutive month, surpassing forecasts of 3.6% [1]. These figures indicated that the disinflation process in the US had stalled, increasing the likelihood of higher interest rates, with money markets pricing in a 74% chance of a 25-basis-point rate hike at the July meeting, according to Prime Terminal [1].
Additionally, US Durable Goods Orders rose by 1.1% in July, outperforming both forecasts and June’s 0.5% reading, largely due to transportation equipment [1]. Meanwhile, the Bank of Mexico (Banxico) released its Quarterly Report for Q2 2026, updating its economic forecasts. Banxico now expects GDP growth to rise from 1.1% to 1.5%, while headline inflation is projected to converge to the 3% target by Q4 2027, a slower pace than previously anticipated. Core inflation is forecast at 3.5%, up from 3.4%, and is also expected to reach the 3% goal by the end of 2027. Banxico noted that economic activity continues to slow due to uncertainty surrounding the review of the USMCA [1].
From a technical perspective, USD/MXN trades at 16.9563, extending its pullback and remaining below a cluster of simple moving averages grouped around 17.3219, which maintains a near-term bearish bias. The price is well under a medium-term descending resistance trend line from 18.1651, while the Relative Strength Index (RSI) at 31.65 hovers just above oversold territory, suggesting weakening downside momentum but not yet signaling a reversal. Initial resistance is located at the triple SMA area near 17.3219, with further resistance at the medium-term line around 18.1651 and a longer-term downtrend reference near 21.0808 [1].
Looking ahead, the US economic docket will feature Initial Jobless Claims on Thursday, followed by Chair Kevin Warsh's speech at the Jackson Hole Symposium, which could further influence market sentiment [1].
CONCLUSION
The Mexican Peso's decline against the US Dollar was driven by stronger-than-expected US inflation data, which renewed bets on a potential Fed rate hike. Banxico's updated forecasts point to slower progress toward inflation targets and modest GDP growth. Market participants will be watching upcoming US economic releases and Fed commentary for further direction.