Mexican Peso pares some losses with all eyes on US PCE inflation

The Mexican Peso picks up from lows as the US Dollar pulls back ahead of US PCE inflation.
The MXN bounced up on Thursday after Banxico confirmed expectations and cut interest rates by 25 bps.
USD/MXN is losing upward momentum, with support at 20.30 under pressure.

The Mexican Peso (MXN) trades with minor gains against the US Dollar (USD) on Friday, regaining some of the ground lost following a ”hawkish cut” by the Federal Reserve (Fed) on Wednesday.

The Peso bounced up from two-week lows on Thursday after the Bank of Mexico (Banxico) confirmed investors’ expectations and cut rates by 25 basis points (bps) to close the year at 10%.

The central bank’s statement warns about the negative impact of higher tariffs in the US and observes that the labour market loosened. Inflation has cooled and is expected to continue that way, which will allow the bank to ease its monetary policy further next year.

Today, the focus is on the US Personal Consumption Expenditures (PCE) Prices Index, which is expected to confirm that inflation remains sticky at levels above the Fed’s 2% rate. An upside surprise today would cast further doubt on the Fed’s easing cycle and provide additional support for the US Dollar.

A mild US Dollar pullback is providing support to the MXN

The Mexican Peso is picking up as the U Dollar Index (DXY) retreats moderately after having rallied about 1.5% this week.
In the US on Thursday, the third quarter's Gross Domestic Product was revised higher to a 3.1% annualized growth from the previously estimated 2.8% increase.
Beyond that, data from the Labor Department revealed that Jobless Claims grew by 220K in the week of November 13, well below the 230K expected and a 242K increase in the previous week.
The Bank of Mexico’s inflation forecasts reveal that the country’s Consumer Prices Index (CPI) will end the year at 4.6%, down from previous estimations of 4.7%, but will not converge with the central bank’s target until the second half of 2026.
Later today, the US PCE Prices Index is expected to show a steady 0.2% monthly increase in November, with the yearly rate up to 2.5% from 2.3% in October.

The core PCE, considered more relevant for monetary policy purposes, is seen slowing down to 0.2% from 0.3% on month and accelerating to 2.9% on year from 2.8% in October.

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.13%	0.04%	-0.38%	-0.03%	0.25%	0.12%	-0.33%
EUR	0.13%		0.17%	-0.20%	0.13%	0.40%	0.25%	-0.20%
GBP	-0.04%	-0.17%		-0.37%	-0.07%	0.20%	0.08%	-0.37%
JPY	0.38%	0.20%	0.37%		0.33%	0.60%	0.46%	0.03%
CAD	0.03%	-0.13%	0.07%	-0.33%		0.27%	0.15%	-0.30%
AUD	-0.25%	-0.40%	-0.20%	-0.60%	-0.27%		-0.14%	-0.57%
NZD	-0.12%	-0.25%	-0.08%	-0.46%	-0.15%	0.14%		-0.44%
CHF	0.33%	0.20%	0.37%	-0.03%	0.30%	0.57%	0.44%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Mexican Peso technical outlook: USD/MXN is testing support at the 20.30 previously top

The USD/MXN recovery has been capped at 20.50, and the pair pulled back to test support at the top of the previous trading channel at the 20.25-20.30 area.

Technical indicators show that the bullish momentum is losing steam, although the Relative Strength Index (RSI) remains above 50. On the downside, below the mentioned 20.25, the next target is the key 20.00 level (November 19 and December 16 lows). Resistances are at Thursday’s high of 20.50, ahead of the November 6 and 26 highs at 20.80.

USD/MXN 4-Hour Chart

USDMXN Chart

Banxico FAQs

What is the Bank of Mexico?

The Bank of Mexico, also known as Banxico, is the country’s central bank. Its mission is to preserve the value of Mexico’s currency, the Mexican Peso (MXN), and to set the monetary policy. To this end, its main objective is to maintain low and stable inflation within target levels – at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%.

How does the Bank of Mexico’s monetary policy influence the Mexican Peso?

The main tool of the Banxico to guide monetary policy is by setting interest rates. When inflation is above target, the bank will attempt to tame it by raising rates, making it more expensive for households and businesses to borrow money and thus cooling the 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. The rate differential with the USD, or how the Banxico is expected to set interest rates compared with the US Federal Reserve (Fed), is a key factor.

How often does the Bank of Mexico meet during the year?

Banxico meets eight times a year, and its monetary policy is greatly influenced by decisions of the US Federal Reserve (Fed). Therefore, the central bank’s decision-making committee usually gathers a week after the Fed. In doing so, Banxico reacts and sometimes anticipates monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised rates, Banxico did it first in an attempt to diminish the chances of a substantial depreciation of the Mexican Peso (MXN) and to prevent capital outflows that could destabilize the country.