The Mexican peso slipped against the U.S. dollar in Monday’s trading, marking a cautious start to the week for emerging market currencies. The move reflects a mix of weaker domestic economic signals and heightened global uncertainty ahead of Tuesday’s U.S. consumer price index (CPI) release.
According to Bank of Mexico (Banxico) figures, the peso closed at 18.6800 per dollar, down from Friday’s 18.6014—a loss of 0.42% in a single session. Trading ranged between 18.6935 and 18.5713, while the U.S. dollar broadly strengthened, with the Intercontinental Exchange’s Dollar Index (DXY) up 0.32% to 98.49.
Peso edges toward resistance zone
Over the past ten sessions, the peso has gradually weakened from 18.45 to 18.68, as shown in the chart below:
This slow climb in the exchange rate—indicating peso depreciation—has been fueled by soft domestic economic data and a stronger dollar environment.
Industrial slowdown compounds pressure
The latest report from INEGI showed industrial activity contracted 0.1% in June from May, and 0.4% year-over-year. The weak print follows Banxico’s decision last week to cut interest rates by 25 basis points, its first move toward monetary easing in months.
For investors, the combination of lower rates and weaker output signals potential headwinds for the peso in the near term. Lower rates narrow the interest rate differential with the U.S., reducing carry trade appeal, while sluggish industry points to slower GDP growth ahead.
Trade truce buys time—but not certainty
Markets also reacted to U.S. President Donald Trump’s announcement of a 90-day extension to the tariff truce with China. While the delay averted a hike in duties on Chinese goods, the lack of a permanent agreement keeps global supply chain risks alive.
Juan Carlos Cruz Tapia, a financial consultant, said the move “could increase trading desk appetite for risky assets” in the short term, but warned that “volatility could return quickly if negotiations falter.”
All eyes on U.S. CPI and Fed policy
The market’s immediate focus is Tuesday’s release of July U.S. CPI data. Forecasts call for 2.8% annual inflation, the fastest pace since February and the third consecutive monthly increase.
A hotter-than-expected CPI reading would strengthen the case for the Federal Reserve to maintain higher rates for longer, reinforcing dollar strength and putting fresh pressure on the peso. Conversely, a softer figure could spark a relief rally in emerging market currencies.
Short-term outlook: caution warranted
With industrial weakness at home, uncertain trade prospects abroad, and a pivotal U.S. inflation report on the horizon, peso traders face a high-risk environment this week. Many will be looking for confirmation from technical indicators—such as whether the peso can hold below the 18.70 resistance level—before making directional bets.
A decisive move in either direction is likely to be driven by Tuesday’s CPI data, making it the single most important catalyst for the peso’s short-term trajectory.
Technical Outlook for Traders
For those following peso-dollar movements through a technical lens, several key indicators stand out:
- Price & Moving Averages (MA10 & MA20)
The peso remains above its 10-day and 20-day moving averages, suggesting short-term bullish momentum for the dollar (bearish for the peso).
- Relative Strength Index (RSI)
The RSI is trending toward 70, indicating the peso is nearing overbought territory against the dollar. Traders may watch for reversals if RSI crosses above 70.
- MACD
The MACD remains above its signal line, reinforcing the current bullish trend for USD/MXN. A crossover would be the first technical sign of a momentum shift.
