Mexican Peso surges as inflation data weighs on the USD

The Mexican Peso appreciates against the US Dollar during the North American session, up 0.29% after the latest US inflation reports, easing expectations that the Federal Reserve would raise rates to tackle high inflation. At the time of writing, the USD/MXN trades at 17.38

USD/MXN falls as soft US inflation pressures US Dollar

The Greenback remains pressured as depicted by the US Dollar Index (DXY), which tracks the value of the US currency against six others, and is down 0.45% at 100.45. 

US economic data revealed that prices paid by producers —also known as the Producer Price Index (PPI) was 5.5% YoY in June, down from May’s 6% increase and also below estimates for a 6.2% reading. Meanwhile, core PPI came in at 4.7% YoY, up from the previous 4.6% reading but below forecasts.

The report, along with the Consumer Price Index (CPI) released on Tuesday, weighed on the US Dollar. Nevertheless, the Mexican currency could not claim victory, as tensions in the Middle East continue and a rise in Oil prices is usually a tailwind for the Greenback.

Following the US PPI release, money markets had priced in 22 basis points of Federal Reserve tightening towards the end of the year, as revealed by the Prime Terminal interest rate probability table. For the July meeting, investors expect the Fed to keep rates unchanged, but for the December meeting, the odds are at nearly 64%.

Across the south of the border, the Mexican economic docket remains absent, but Moody’s downgrading Mexico’s credit worthiness to Baa3 suggests that fiscal policy is walking a tight rope.

Last week, Mexican inflation data in June fell for the third straight month, to its lowest print since 2020. Headline inflation rose 3.37% YoY, down from May’ws 3.94%. The underlying print, expanded at a 4.03% YoY, slightly above the Bank of Mexico (Banxico) 3% plus or minus 1% goal.

Banxico welcomed the data, which, at its last meeting, held rates unchanged at 6.5% in a unanimous decision amid high energy prices fueled by the Middle East conflict.

USD/MXN Price Forecast: Technical outlook

In the daily chart, USD/MXN trades at 17.3831. The pair is holding just above the triple simple moving average (SMA) cluster at 17.3761, which now acts as immediate support and keeps the near-term tone broadly neutral rather than decisively bearish. The Relative Strength Index (RSI) at 46 suggests subdued momentum, hinting at consolidation rather than a strong directional move while the broader structure remains capped by descending trend-line resistance overhead.

On the topside, the first structural barrier comes from the nearer downward resistance trend line derived from the 18.1651 peak and projected through recent highs, with additional supply reinforced by the longer-term descending trend line originating at 21.0808, both sitting above current market levels and framing the medium-term bearish backdrop. On the downside, immediate support is located at the triple SMA cluster around 17.3761; a daily close below this floor would open the way for a deeper pullback, while sustained trading above it would keep USD/MXN in a sideways-to-slightly-bid stance within its broader declining channel.