The Mexican Peso posted gains of over 0.62% against the US Dollar on Thursday after the Banco de Mexico (Banxico) unanimously decided to hold interest rates unchanged at 6.50%. The USD/MXN trades at 17.49, after reaching a one-and-a-half-month peak at 17.67.
USD/MXN dips as Banxico shifts dovish bias, flags inflation risks
The Mexican currency is boosted by Banxico’s decision to keep interest rates unchanged, and it sees inflation risks tilted to the upside. Banxico projects headline inflation to reach the bank’s 3% plus or minus 1% target in the second quarter of 2027. Worth noting that the board dropped the dovish language while updating its economic projections.
The Mexican economy is expected to recover in the second quarter of 2026, following the contraction in Q1, while headline inflation towards the end of 2026 is projected at 3.5%, with underlying inflation also finishing the current year at 3.5% as headline.
The USD/MXN extended its losses following Banxico’s hawkish hold, ignoring comments by the New York Fed President John Williams, who crossed the wires, following the Mexican central bank’s meeting and said that “inflation is still too high.”
Williams added that monetary policy is well-positioned, that the jobs market “has proved to be resilient, and that it’s imperative to get inflation back to the Fed’s 2% goal. Earlier, Chicago Fed President Austan Goolsbee commented that core inflation is “still too high,” trending in the wrong way, and that of the Fed’s dual mandate, he prioritises inflation.
Economic data in the US was solid, with the first-quarter 2026 GDP upwardly revised from 1.6% to 2.1% in its final reading. In the same tone, Initial Jobless Claims for the week ending June 20 dipped from 217K to 215K, below the 217K estimate.
On the negative tone was inflation, with the Fed’s favourite inflation gauge, the core PCE, rising as expected, by 3.4% YoY in May, up from April’s 3.3% and Durable Goods Orders, which plunged -4.5% YoY from a 8% increase in April.
Despite this, the Greenback failed to gain traction, as the US Dollar Index (DXY), which measures the buck’s performance against its peers, is down 0.19% at 101.39, off yearly highs reached during the sixth-day rally that pushed the DXY towards 101.80.
Bottom line, the Mexican Peso is appreciating due to the revenue of hosting 13 matches of the World Cup, totaling benefits of almost US $2.73 billion in added value, or 0.14% of GDP for 2026, mostly in the services sector, according to Deloitte.
However, once the tournament is over, the reality sinks in. The interest rate differential is set to narrow as Banxico keeps rates unchanged, while the Fed is expected to hike rates, potentially opening the door to further USD/MXN upside.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 17.4962, maintaining a constructive bullish tone as spot holds above the clustered support of the triple simple moving average around 17.3477. The pair also trades above the broken long-term descending resistance line tied to 16.1713, hinting that the broader bearish structure has given way to a medium-term recovery phase. Momentum backs this view, with the 14-day Relative Strength Index at 56.9, staying in positive territory without yet reaching overbought conditions.
On the downside, immediate support is seen at the latest close area around 17.50, with the triple SMA at 17.35 offering a secondary floor ahead of the former long-term trend barrier near 16.17. On the topside, the next technical hurdle emerges at the more recent descending resistance line coming from 18.70, now projected around 17.84, and a clear break above this area would open the path for a deeper corrective advance in favor of the dollar.
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