- The Mexican Peso holds firm despite weak consumer confidence data as focus remains on the broader risk sentiment.
- Talks between the United States and China, scheduled for Saturday, remain a critical theme for the Peso and EM currencies
- USD/MXN eyes Fed speakers ahead of the upcoming Banxico meeting
The Mexican Peso (MXN) is strengthening against the US Dollar (USD) in Friday’s European session, as Federal Reserve speakers and US-China trade talks overshadow weak Consumer Confidence data out of Mexico for April.
At the time of writing, USD/MXN is trading near 19.503, down 0.11%, with further moves likely driven by sentiment shifts around Fed policy signals, domestic economic data, and global trade developments.
Mexico’s Consumer Confidence falls in April, signalling softer domestic outlook
Mexico’s National Institute of Statistics and Geography (INEGI) reported a steep drop in April Consumer Confidence, with the headline index plunging to 45.5 from 64.1 in March.
The seasonally adjusted figure also declined to 45.3, down from 46.0. The index reflects household sentiment on finances, job prospects, and the broader economy, key drivers of domestic demand.
Despite the sharp decline, USD/MXN showed little reaction. Markets have largely priced in the weaker domestic outlook, especially amid growing expectations for a 25-50 basis-point Banxico rate cut next week (15 May).
Additionally, investor focus remains on external risk sentiment, including global rate differentials and ongoing US-Mexico trade tensions. With these broader macro drivers dominating direction, soft consumer confidence is viewed as confirmation rather than a new catalyst.
Fed-Speak in focus as markets weigh policy divergence
Another major driver for USD/MXN is the interest rate differential and policy divergence between Banxico and the Federal Reserve. With central banks globally still focused on curbing inflation, markets are closely watching a series of speeches today from Fed officials after their decision to leave US interest rates stable on Wednesday.
The USD/MXN pair is likely to be driven by a packed schedule of Federal Reserve speakers on Friday, with key voting members, including Governors Adriana Kugler, Lisa Cook, and Christopher Waller, delivering remarks that could influence expectations for US monetary policy. Markets will be particularly sensitive to any hawkish signals amid ongoing uncertainty about the Fed’s next move.
The speeches by known hawks like Kugler and Musalem may tilt sentiment toward a stronger US Dollar (USD) if they reinforce the case for holding rates higher for longer.
Meanwhile, multiple appearances at the Hoover Monetary Policy Conference raise the chance of coordinated or reinforcing messages on inflation and rate strategy.
Mexican Peso daily digest: USD/MXN key themes
- Mexico’s April inflation report, released on Thursday, showed price growth accelerating to 3.93% YoY, above the 3.90% forecast. Core inflation rose 0.49% MoM, up from 0.43% in March and exceeding expectations of 0.47%.
- The upside surprise in both headline and core figures signals persistent underlying price pressures.
- Still, as inflation remains within the central bank’s target range of between 2% and 4%, markets widely expect the Banxico to cut rates next week.
- Over the weekend, Treasury Secretary Scott Bessent and Jamieson Greer will meet with Chinese officials in Switzerland to discuss trade, with tensions between the world’s largest economies remaining as a key driver for risk sentiment
- As an Emerging Market (EM) currency, the peso is highly sensitive to global risk sentiment and trade dynamics. With about 80% of Mexico’s exports going to the US and China serving as a major supplier of intermediate goods, the peso is particularly vulnerable to shifts in trade flows and investor appetite for risk.
- Recent US tariff announcements on aluminium, steel, and autos – as well as the potential for additional levies outside the USMCA – have raised concerns about Mexico’s growth outlook and added to economic uncertainty.
USD/MXN technical setup: Bearish pressure persists below 19.60
USD/MXN remains under pressure, trading just above key support at 19.50, with the broader trend still pointing lower.
The pair is struggling to reclaim the 10-day Simple Moving Average (SMA) at 19.59, which continues to act as dynamic resistance.
Price action remains capped by a descending trendline from the April decline, reinforcing bearish momentum.
For bulls to gain traction, a move above the 10-day SMA and a break above the 19.60 psychological level may provide the opportunity for USD/MXN to continue toward the May high at around 19.78.
Meanwhile, a move below 19.50 and a daily close below the April low of 19.47 could expose further downside.
The Relative Strength Index (RSI) at 38.35 suggests bearish momentum without being oversold, indicating that there’s still room for sellers to stay in control unless a fundamental catalyst triggers a reversal.
USD/MXN daily chart
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
