Mexican weight falls as operators reduce risk before decision on Fed types

  • The Mexican weight falls 0.53%, the USD/MXN reaches 20.00 while the markets await the FOMC decision.
  • The US dollar rises 0.47% to 103.72 in the DXY; Global actions recover in the midst of the uncertainty of the Fed.
  • The next movement of Banxico in the focus; The aggregate demand data and private expense of Mexico will be published on Thursday.

The Mexican peso (MXN) lost ground against the US dollar (USD) in the first operations on Wednesday, since market participants expected the monetary policy decision of the Federal Open Market Committee of the USA (FOMC), thus reducing their exposure to high beta currencies as weight. The USD/MXN is quoted again above 20.00, with an increase of 0.53%.

Global actions record profits, something unusual on a Fed decision day, while the dollar recovers some land, as indicated by the US dollar index (DXY) that rises 0.47% to 103.72. Apart from the Fed, the economic agendas of Mexico and the US are absent.

The USD/MXN operators will pay attention to the Fed, which is expected to keep the rates without changes in the 4.25%-4.50%range. In the last summary of Economic Projections (SEP), the officials projected only two rate cuts in the year. However, doubts persist after those responsible for the Fed emphasize that the policy is well positioned and that they are not in a hurry to resume the cuts of interest rates.

On Thursday, Mexico’s economic agenda will include the publication of aggregate demand data and private spending. The data could shed some light on the current economic conditions and give some clues about the next Bank of Mexico (Banxico) policy movement at the Monetary Policy Meeting of March 27.

What moves the market today: the Mexican defensive peso against a strong US dollar

  • The Organization for Economic Cooperation and Development (OECD) revealed earlier this week that US tariffs on Mexican products could cause a recession in Mexico. If tariffs remain unchanged, the OECD projects that Mexico’s economy will contract -1.3% in 2025 and -0.6% in 2026.
  • Last Wednesday, Mexico’s Minister of Finance, Edgar Amador Zamora, said the national economy is expanding, but shows signs of deceleration due to commercial tensions with the US.
  • The operators had discounted that the Fed would relax politics in 57 basic points (PB) throughout the year. However, the inflationary commercial policies of President Donald Trump could prevent the Central Bank of the USA.
  • Until now, an Atlanta Fed model updated on March 18 shows that the Gross Domestic Product (GDP) is expected to contract -1.8% in the first quarter of 2025.

Technical perspective of the USD/MXN: The Mexican weight is removed while the USD/MXN rises above 20.00

The USD/MXN seems to have touched the bottom near the range of 19.89–20.00 while the operators expect a new catalyst. A hard line inclination by the Fed could refresh the weekly maximums and clear the way to challenge the simple mobile average (SMA) of 100 days in 20.35. If it is exceeded, the next stop would be the 50 -day SMA at 20.42.

On the contrary, if the USD/MXN falls below 19.90, operators could expect a fall to test the simple mobile (SMA) average (SMA) in 19.65. Once exceeded, the following key support levels would be 19.50, 19.00 and the minimum of August 20, 2024 in 18.64.

Mexican weight FAQS


The Mexican weight (MXN) is the most commercialized currency among its Latin American peers. Its value is widely determined by the performance of the Mexican economy, the country’s central bank policy, the amount of foreign investment in the country and even remittance levels sent by Mexicans living abroad, particularly in the United States. Geopolitical trends can also affect MXN: for example, the Nearshoring process (or the decision of some companies to relocate the manufacturing capacity and supply chains closer to their countries of origin) is also considered a catalyst for the Mexican currency, since the country is considered a key manufacturing center in the American continent. Another catalyst for MXN is oil prices, since Mexico is a key exporter of the raw material.


The main objective of the Central Bank of Mexico, also known as Banxico, is to maintain inflation at low and stable levels (in or close to its 3%target, the midpoint of a tolerance band between 2%and 4%). To do this, the bank establishes an adequate level of interest rates. When inflation is too high, Banxico will try to control it by raising interest rates, which makes the indebtedness of homes and companies more cooling, thus cooling the demand and the economy in general. The highest interest rates are generally positive for Mexican weight (MXN), since they lead to higher yields, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the MXN.


The publication of macroeconomic data is key to evaluating the state of the economy and can have an impact on the valuation of the Mexican weight (MXN). A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only attracts more foreign investment, but it can encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this fortress is accompanied by high inflation. However, if the economic data is weak, the MXN is likely to depreciate.


As an emerging market currency, the Mexican weight (MXN) tends to rise for periods of risk, or when investors perceive that the general market risks are low and, therefore, are eager to participate in investments that carry a higher risk. On the contrary, the MXN tends to weaken at times of market turbulence or economic uncertainty, since investors tend to sell higher risk assets and flee to the most stable safe shelters.

Source: Fx Street

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