- Mexican Peso edges lower as strong US outlook fuels Dollar buying
- US–China tariff truce lifts global sentiment, adding support to the US Dollar
- USD/MXN pushes toward key resistance after erasing recent losses
- Banxico is expected to cut rates again on Thursday, deepening policy divergence
The Mexican Peso is currently trading at a disadvantage against the US Dollar on Monday, as a resurgence of optimism surrounding the US economic outlook and a widening divergence in monetary policy continue to exert downward pressure on emerging market currencies, including the Peso.
As of this writing, the USD/MXN exchange rate is hovering around 19.59, reflecting a 0.78% increase for the session. This upward movement follows a breach above a descending trendline resistance level and the 10-day Simple Moving Average (SMA), signaling a potential shift in short-term momentum.
This market activity coincides with investors digesting the implications of the recently announced US–China trade truce, elevated US Treasury yields, and anticipations of Banxico delivering its seventh consecutive interest rate cut on Thursday. While a stronger-than-anticipated Mexican industrial output report for March offered some respite, the Peso remains vulnerable to external headwinds and the narrowing interest rate differential between Mexico and the United States. Market participants are closely watching upcoming inflation data and central bank communications for further clues about the trajectory of monetary policy in both nations.
Greenback strengthens on US–China tariff pause
On Monday, the United States and China jointly announced a 90-day suspension of planned tariff escalations, providing a temporary de-escalation in global trade tensions. This development has contributed to improved market sentiment and alleviated some concerns regarding a potential US-led economic recession, thereby reinforcing expectations that the Federal Reserve (Fed) may possess greater flexibility to maintain interest rates at current levels, or even consider further tightening, should economic conditions remain robust. The prospect of sustained higher interest rates in the US is bolstering the Dollar’s appeal.
Conversely, the Mexican economy continues to face challenges stemming from existing US tariffs on aluminium, steel, and automobiles. These import duties, set at 25%, have effectively increased the cost of Mexican goods within US markets, thereby undermining their competitiveness and placing a significant burden on export-oriented industries. Recent economic data releases and commentary from Mexican policymakers have increasingly highlighted these challenges, indicating signs of a broader deceleration in economic activity. The ongoing NAFTA renegotiations and their potential outcomes also add to the uncertainty surrounding the Mexican economic outlook.
