- Mexican Peso weakens due to strong US data and political uncertainty tied to Mexico’s judiciary reform.
- Mexico’s Q3 GDP exceeds forecasts, but US ADP jobs data and resilient GDP growth lifts the USD.
- Traders eye upcoming data, including Mexico’s Business Confidence and US PCE Price Index and Nonfarm Payrolls.
The Mexican Peso extended its losses against the US Dollar for the fourth straight day on Wednesday and is down 0.62% even though Mexico’s economy grew above estimates. In the US, a stellar ADP jobs report and robust GDP growth in the third quarter boosted the Greenback. Therefore, the USD/MXN trades at 20.18 after bouncing off a daily low of 20.00.
The Instituto Nacional de Estadistica Geografia e Informatica (INEGI) revealed that Mexico’s Gross Domestic Product (GDP) figures for the third quarter of 2024 surprisingly beat estimates. Meanwhile, political turmoil linked to Mexico’s judiciary reform continued as eight of the eleven Supreme Court judges announced their resignation effective in August 2025.
Across the border, data hinted that the US Federal Reserve’s (Fed) soft-landing scenario continued to gain traction. The US ADP Employment Change for October exceeded the mark, brushing aside fears that the labor market is weakening. In the meantime, US GDP data for Q3 2024 dipped below estimates and Q2’s reading.
Ahead of the week, Mexico’s economic schedule will feature the release of Business Confidence and S&P Global Manufacturing PMI. Across the border, the US docket will feature the Fed’s favorite inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index and Nonfarm Payrolls (NFP).
Daily digest market movers: Mexican Peso tumbles after strong GDP data in Mexico and US
- Mexico’s GDP for Q3 2024 expanded 1% QoQ, exceeding the consensus of 0.8% and Q2’s 0.2% growth. On a yearly basis, GDP grew 1.5%, above forecasts of 1.2%, but dropped below the 2.1% reached in the previous quarter, indicating the ongoing economic slowdown.
- Therefore, the ongoing economic slowdown and disinflation could open the door for the Bank of Mexico (Banxico) to lower borrowing costs at the November meeting.
- Money market futures hint that Banxico is expected to cut between 175 to 200 basis points over the next 12 months.
- ADP National Employment Change in October rose by 233K, above estimates of 115K and September’s 159K.
- The US Bureau of Economic Analysis revealed the US economy grew 2.8% YoYin the third quarter of 2024, below Q2’s final reading and estimates of 3%.
- Other data showed that Pending Home Sales in September expanded by 7.4% MoM above estimates and August’s figures. Annually based, sales grew 2.6%, up from August’s -3% contraction.
- Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 49 bps of Fed easing by the end of the year.
USD/MXN technical outlook: Mexican Peso plunges as USD/MXN clears 20.15
The USD/MXN prolonged its uptrend and tested the year-to-date (YTD) high of 20.22 as buyers seem reluctant to push the exchange rate past that area. If they clear that level, up next would be the psychological 20.50 level, the September 28, 2022 high at 20.57, and the August 2, 2022 peak at 20.82. Once surpassed, the next stop would be the March 8, 2022 swing high at 21.46.
On the other hand, if sellers drive the USD/MXN below 20.00, the first support would be the October 24 daily low of 19.74, followed by the 50-day Simple Moving Average (SMA) at 19.62.
Oscillators indicate that buyers are gathering steam, as displayed by the Relative Strength Index (RSI) above its neutral line, clearing previous highs reached on September 10 and August 22.
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall 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.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
