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  • Writer's pictureSieracki Milosz

Mexican Peso Exchange Rate: Factors, Trends and Analysis - 20 October

Mexican Peso Exchange Rate, Coins, dollars, charts forex

In recent times, Mexican Peso (MXN) it has been under the spotlight as it continues to grapple with the formidable US Dollar (USD). The exchange rate between the Mexican Peso and the US Dollar remains on the defensive, printing more than a 1% weekly loss. This development has captured the attention of investors and economists alike, prompting a closer examination of the driving forces behind this situation.

August Retail Sales in Mexico: A Mixed Picture

One significant factor affecting the Mexican Peso's exchange rate is the performance of the Mexican economy. The latest data on August Retail Sales in Mexico presents a mixed picture. On one hand, there are gains over the year, but on the other, there is a noticeable monthly plunge and signs of deceleration.

According to Mexico's National Statistic Agency, known as INEGI, August Retail Sales witnessed a decline on a monthly basis, falling by 0.4%. This figure missed estimates of 0%, indicating a setback in consumer spending for the month. However, on an annual basis, Retail Sales expanded by 3.2%, showing a more positive long-term trend.

This mixed picture indicates the challenges the Mexican economy is currently facing, with certain sectors showing signs of strain, possibly due to a combination of factors, including global economic conditions and domestic policies.

Geopolitical Risks and Their Impact on the Peso

In the world of currency exchange, it's not just economic data that plays a pivotal role. Geopolitical events can also sway the fortunes of a currency, and the Mexican Peso is no exception. Recent tensions in the Middle East, particularly the ongoing conflict involving Israel's offensive against Hamas, have contributed to the Peso's defensive posture. The Middle East remains a region with considerable influence on global markets, especially when it comes to oil prices, and Mexico, like many other countries, feels the ripples of such events.

Furthermore, the United States (US) has reported that its military bases in Iraq and Syria are increasingly coming under attack. These attacks have raised concerns and uncertainty in the region, which can lead to risk-aversion among investors. When investors perceive increased risk, they tend to shift their investments away from currencies like the Mexican Peso, causing it to weaken.

US Monetary Policy and Its Impact on the Mexican Peso

The policies of the United States Federal Reserve (the Fed) have always been a significant influence on currency exchange rates. Recent comments made by Fed Chair Jerome Powell have added another layer of complexity to the equation. Powell's remarks, suggesting that the US central bank might keep interest rates unchanged at the upcoming November meeting, have had a notable impact on the US Dollar.

This change in the stance of the Federal Reserve could influence the flow of capital into and out of Mexico. A stable or potentially weakening US Dollar might attract more investors to the Peso, seeking better returns. However, this dynamic is not without its challenges, as it can lead to a stronger Peso, potentially impacting the country's export sector.

Economic Indicators in the United States

The economic performance of the United States also plays a role in the Mexican Peso's exchange rate. Recent data from the US includes a rise in Initial Jobless Claims for the week ending October 14, though it was below estimates and previous week data. Additionally, Existing Home Sales in the US experienced a contraction, and Building Permits dropped in September.

These figures suggest a mixed economic performance in the US, which can indirectly impact the Mexican Peso. Investors often compare the economic conditions of both countries to make informed decisions regarding their investments.

Mexico's Economic Outlook

Mexico's economic outlook for 2023 is expected to hit 3.2%, according to the World Bank and the International Monetary Fund. This projection indicates a degree of confidence in Mexico's economic potential. Furthermore, Mexico's Industrial Production for August exceeded forecasts, showing resilience and growth in the country's industrial sector.

The Consumer Price Index (CPI) in Mexico grew by 4.45% YoY in September, slightly below the estimated 4.47%. The core CPI inflation in Mexico, which excludes volatile items, stood at 5.76% YoY, aligning with expectations.

The Bank of Mexico (Banxico) held interest rates at 11.25% in September, aiming to control inflation. The central bank also revised its inflation projections for 2024, indicating a commitment to stability.

Technical Analysis: Outlook for the Mexican Peso

In the realm of technical analysis, the USD/MXN currency pair has shown an upward bias, although it has fallen short of testing the latest cycle high. This suggests potential for a pullback in the exchange rate.

If the pair does indeed drop, it could target the 18.00 level before testing the 20-day Simple Moving Average (SMA) at 17.91. A further drop could pose a threat to the uptrend, with the 200-day SMA at 17.74 serving as a critical support level.

On the flip side, if buyers regain control and the exchange rate reclaims 18.48, it opens the door for a potential rise towards the 18.50 level and beyond, possibly even reaching the 19.00 mark.


The exchange rate between the Mexican Peso and the US Dollar is currently experiencing turbulence, influenced by a myriad of factors including economic indicators, geopolitical risks, and monetary policy decisions. While the Peso remains on the defensive, it's crucial to monitor developments in the Mexican and US economies, as well as geopolitical events, to gain a clearer understanding of the future direction of this currency pair.

As an investor or trader, staying informed about these factors is essential for making well-informed decisions in the dynamic world of Forex trading. The Mexican Peso may be on the defensive now, but with the right insights and strategies, it has the potential to regain its strength in the ever-changing global financial landscape.

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