The Mexican Peso (MXN) registered solid gains of over 0.22% against the US Dollar (USD) on Thursday, with the USD/MXN pair trading at 17.54 after reaching a daily high of 17.57. This movement was attributed to improved risk appetite following the end of two days of hostilities between the US and Iran, despite US President Donald Trump's warning that the deal might be 'over' [1]. The Peso's strength was further supported by broad US Dollar weakness and favorable economic data from Mexico.
Mexico's Consumer Price Index (CPI) for June fell to its lowest level since December 2020, dropping for the third consecutive month from 3.94% to 3.37% year-over-year, below estimates of 3.52%. However, core inflation rose to 4.03% year-over-year, slightly above Banxico’s target of 3% plus or minus 1% [1]. This easing in headline inflation has reduced pressure on the Bank of Mexico (Banxico), which last month held its main reference rate unchanged at 6.50% and signaled that rates would remain steady through the end of 2026. Banxico’s meeting minutes indicated that negotiations between the US and Iran contributed to cooling inflationary pressures [1].
According to a Citi Expectations Survey, most economists anticipate Banxico’s main reference rate will stay at 6.50% for the remainder of the year and into 2027 [1]. In the US, recent FOMC meeting minutes revealed that most Federal Reserve officials support additional tightening, though some prefer to pause and gather more data. Money markets currently assign an 87% probability of a rate hike in 2026. New York Fed President John Williams expressed concern about persistently high inflation and emphasized the importance of data-dependent monetary policy, particularly regarding energy prices [1].
From a technical perspective, USD/MXN maintains a mildly bullish near-term bias, trading above the triple simple moving average cluster around 17.37. The Relative Strength Index (14) is at 56, indicating constructive momentum but not a decisive breakout above the broader downtrend. Initial support is near 17.37, with resistance at the current price zone, ahead of a stronger resistance level [1]. Traders are now awaiting next week’s economic releases, including CPI, PPI, jobless claims, and housing market data [1].
CONCLUSION
The Mexican Peso's recent gains are driven by improved risk sentiment, cooling inflation, and Banxico's commitment to steady rates. While technical indicators suggest constructive momentum, traders remain cautious ahead of upcoming economic data releases. The market is likely to monitor both Mexican and US inflation trends for further direction.