The Mexican Peso (MXN) reached a five-month high against the US Dollar (USD) on Friday, driven by weaker-than-expected US jobs data and increased risk appetite among investors. At the time of reporting, the USD/MXN pair traded at 17.18, after hitting a low of 17.09 earlier in the session [1]. The US Nonfarm Payrolls report for July revealed a loss of 23,000 jobs, significantly missing the forecast of an 80,000 gain. Additionally, revisions for May and June reduced job counts by 103,000, further weakening the outlook for the US labor market. Despite the disappointing jobs numbers, the US Unemployment Rate fell from 4.2% to 4.1% [1].
The weak US jobs data fueled speculation that the Federal Reserve may not raise interest rates in 2026, leading to a decline in the US Dollar Index (DXY), which fell by 0.42% to 99.54 [1]. This decline in the Greenback provided further support for the Mexican Peso. On the domestic front, Mexico's inflation rate eased to a six-year low, dropping from 3.37% to 3.12% year-over-year in July, according to INEGI. Core inflation was reported at 3.95% year-over-year, slightly above the forecast of 3.94% [1].
The Bank of Mexico (Banxico) recently left its benchmark interest rate unchanged at 6.50% and indicated that rates would likely remain steady for the foreseeable future. The central bank projects that inflation will converge to its 3% target in the last quarter of 2027, with the possibility of ending 2026 below its 3.5% forecast for both headline and underlying inflation if the current trend continues [1].
From a technical perspective, USD/MXN is trading below key simple moving averages, reinforcing a bearish near-term outlook. The Relative Strength Index (RSI) at 32.4 is just above oversold territory, suggesting that while selling pressure is strong, a corrective bounce could occur if the pair moves lower. Immediate resistance is seen at the 17.4061 level, with further resistance at 17.4584, while a deeper decline could target the 15.6962 area [1].
Looking ahead, the Mexican economic calendar will feature June Industrial Output next week, while US investors will focus on upcoming inflation data, jobless claims, and the University of Michigan Consumer Sentiment report [1].
CONCLUSION
The Mexican Peso's rally to a five-month high was primarily driven by weak US jobs data and easing inflation in Mexico. The combination of a softer US Dollar and steady policy from Banxico has strengthened the Peso's position. Market participants will closely watch upcoming economic releases for further direction.