The Mexican Peso (MXN) extended its losses against the US Dollar (USD) on Thursday, with the USD/MXN pair rallying more than 1% to trade at 17.75, marking its highest level since late April 2026 [1]. This move followed the Bank of Mexico's (Banxico) decision to hold its benchmark interest rate unchanged at 6.50% for the third consecutive time, with the decision made unanimously [1]. Banxico emphasized in its monetary policy statement that it would not react mechanically to anticipated adjustments in the US Federal Reserve's funds rate, instead prioritizing the ongoing disinflation process and the expected behavior of its determinants, including the USD/MXN exchange rate [1].
Banxico's inflation projections suggest that both headline and core inflation will converge toward its 3% target by the fourth quarter of 2027 [1]. Recent inflation data showed Mexican core inflation for the first half of September rising from 0.08% to 0.17% month-over-month, below forecasts of 0.2%, while headline inflation increased from 0.1% to 0.33%, exceeding forecasts of 0.26% [1].
Meanwhile, hawkish commentary from US Federal Reserve officials, including Cleveland Fed's Beth Hammack, Philadelphia Fed's Anna Paulson, and New York Fed's John Williams, has increased the likelihood of a Fed rate hike at the October 28 meeting [1]. US jobless claims for the week ending September 19 came in at 197,000, below both the previous week's reading of 198,000 and forecasts of 201,000, supporting a stronger USD [1].
From a technical perspective, USD/MXN trades at 17.7243, well above the 50/100/200-day simple moving averages (SMA) cluster at 17.1647, maintaining a bullish near-term bias. However, the Relative Strength Index (RSI) at 79.67 indicates overbought conditions, suggesting the rally may be stretched and could face resistance from descending trend lines at 18.17 and 21.08, which define the medium-term bearish channel [1].
CONCLUSION
Banxico's decision to maintain rates and signal policy independence has led to a sharp decline in the Mexican Peso, with USD/MXN reaching multi-month highs. Strong US economic data and hawkish Fed commentary have further pressured the MXN. While technical indicators suggest continued upside momentum, overbought conditions and resistance levels may limit further gains.