The Mexican Peso (MXN) weakened on Friday after encountering resistance at the top of its downtrend channel, retreating against the U.S. Dollar (USD) following an uptick in the Michigan Consumer Sentiment Survey, which rose to 73 in November, beating expectations.
MXN initially declined after Donald Trump’s election win due to concerns over tariffs on Mexican exports, but later stabilized as Mexico’s inflation data exceeded forecasts, suggesting that the Bank of Mexico (Banxico) may not cut interest rates as aggressively as anticipated. This attracted foreign investment, partially bolstering the Peso.
Further Peso support came after the Federal Reserve’s recent meeting, where the Fed cut the interest rate by 25 basis points but downplayed inflation risks from Trump’s economic policies. Fed Chair Jerome Powell cited uncertainty around policy details and did not reference potential impacts on the economy.
Uncertain Trade Policies Weigh on MXN
Ongoing uncertainty about Trump’s proposed tariffs, especially on Mexican goods, keeps pressure on the Peso. Tariffs of up to 200-300% on vehicles from Mexico were proposed during Trump’s campaign, dampening Chinese investment in Mexican electric vehicle plants. Some analysts, however, believe the Latin American market remains promising for these manufacturers.
The USMCA free trade agreement could also limit Trump’s tariff efforts since Mexican exports to the U.S. require high U.S. component percentages, which might impact U.S. suppliers.
Congressional Outcome Could Influence Peso Trends
While Trump won the presidency, the final Congressional balance is pending. If Republicans secure control, El Financiero estimates USD/MXN could rise to 21.14–22.26, while a Democrat win could contain it to 19.70–21.14.
Technical Analysis: USD/MXN Faces Key Levels
USD/MXN has dropped to the 50-day SMA at 19.70, with the MACD signaling a bearish trend. Despite this, the pair remains in a rising channel, and a break above 20.80 could lead to further gains, with 21.00 as the next resistance.
