The Mexican peso extended its losses, pressured by declining inflation and increasing speculation that Banco de México (Banxico) may shift toward monetary easing. With recent data showing a continued slowdown in price pressures, investors are adjusting expectations for the central bank’s next move, putting downward pressure on the currency.
Mexico’s latest inflation figures revealed a further decline in consumer price growth, reinforcing the view that Banxico could start cutting interest rates sooner than previously expected. While the central bank has maintained a cautious stance, moderating inflation could give policymakers room to lower borrowing costs without reigniting price pressures.
USD/MXN 1-D Chart as of February 24th, 2025 (Source: TradingView)
Meanwhile, the US dollar remained firm, adding to the peso’s weakness, as markets weighed Federal Reserve policy signals. While expectations for eventual Fed rate cuts have risen, resilient US economic data has helped support the dollar, making it harder for the peso to regain traction.
From a technical perspective, USD/MXN has gained momentum, with the pair testing key resistance levels. If the peso continues to weaken, the next target could be 18.00, while stronger support remains near 17.50. Any shift in Banxico’s tone or a rebound in risk appetite could limit further peso declines.
Looking ahead, traders will focus on Banxico’s upcoming policy statements, US inflation data, and global risk sentiment. Any indication that the Mexican central bank is prepared to ease policy sooner than expected could drive further peso weakness, while stronger domestic economic data may provide temporary support.
For now, the peso remains vulnerable, with falling inflation and growing rate cut bets keeping downward pressure on the currency. Unless Banxico pushes back against easing expectations, the peso could remain on the defensive in the near term.
