By Antonio Di Giacomo, Senior Market Analyst at XS.com
The Mexican peso began the session with a moderate appreciation, moving toward the 18.17 per-dollar area in a market marked by caution ahead of the Federal Reserve’s monetary policy announcement. Although a 25-basis-point rate cut is widely expected, sentiment has cooled amid the growing perception that there will not be a prolonged series of additional cuts, in line with the more restrictive stance taken by several members of the U.S. central bank.
During the early hours of trading, the USD/MXN exchange rate briefly reached 18.31, responding to a slight strengthening of the U.S. dollar index against most global currencies. This initial rebound opened the door for profit-taking moves, especially after the peso’s recent appreciation. However, the Mexican currency recovered as traders adjusted positions ahead of the Fed statement.
On the domestic front, November inflation came in higher than expected, reflecting persistent pressures in specific components of the index. However, it did not significantly alter the market’s perception regarding Banxico’s monetary policy trajectory. The reading was interpreted more as an isolated figure than a shift in trend, allowing investors to maintain their appetite for Mexican assets given the country’s macroeconomic stability and still-attractive interest rates.
From a technical perspective, the USD/MXN pair is trading in a critical zone where signs of overbought conditions have been observed, increasing the risk of a correction should the dollar lose momentum after the Fed decision. Indicators such as the RSI show signs of exhaustion, while moving averages suggest an immediate support range around 18.15–18.20.
Globally, markets remain influenced by expectations surrounding U.S. monetary policy. Rate futures assign more than an 85% probability to a 25-basis-point cut. Still, projections for 2026 have weakened due to the increasingly hawkish stance of several central banks and the persistence of inflation risks across developed economies. This combination has fueled episodes of volatility in emerging markets and greater selectivity in investment flows.
Another factor under observation is the uncertainty surrounding the upcoming White House announcement regarding who will lead the Federal Reserve starting in 2026. The eventual departure of Jerome Powell and the possibility of a shift toward a more aggressive or more flexible stance add noise to long-term expectations, influencing recent dollar movements and the reaction of emerging-market currencies.
Despite this mixed scenario, the Mexican peso has remained resilient thanks to solid fundamentals, steady demand for peso-denominated instruments, and the perception that Mexico maintains an attractive macroeconomic framework compared to other emerging markets. Caution prevails, but so does the view that the peso may continue finding support at key levels if the Fed confirms a moderate tone in its statement.
In conclusion, the Mexican peso advances amid global uncertainty and anticipation of the Federal Reserve’s decision. Although local inflation surprised to the upside and the dollar index initially rebounded, the Mexican currency strengthened, supported by internal fundamentals and a technical outlook pointing to potential corrections in USD/MXN. With markets closely watching U.S. monetary policy and the leadership transition at the Fed for 2026, volatility is likely to persist. Still, the peso continues to perform relatively well compared to its emerging-market peers.
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