On Wednesday, the Mexican Peso (MXN) depreciated against the US Dollar (USD), with the USD/MXN pair trading at 17.55, up 0.37% on the day, as speculation mounted regarding the potential cancellation of the United States-Mexico-Canada Agreement (USMCA) and broader USD strength [2]. Newswires reported that former US President Donald Trump expressed opposition to extending the USMCA, while US Trade Representative Jamieson Greer stated that more time is needed to address issues within the agreement. Mexico’s Economy Minister Marcelo Ebrard confirmed that the US chose not to extend the pact, resulting in the treaty being subject to annual review for the next 10 years [2]. In response, Mexican President Claudia Sheinbaum sent a letter proposing a 16-year extension of the free trade zone, contingent on agreement from all three countries [2].
Amid these trade uncertainties, the Bank of Mexico (Banxico) released its latest survey of private analysts, revealing a reduction in inflation expectations for the end of 2026. Headline inflation is now forecast at 4.20%, down from 4.35% in the previous poll, while core inflation is expected to decrease from 4.22% to 4.18% [1]. Economic growth projections for 2024 remain unchanged at 1.10%, with 2027 forecasts steady at 1.80% [1]. The USD/MXN exchange rate is projected to end the year at 17.95, up from the previous estimate of 17.85, and to remain at 18.50 in 2027 [1]. The interbank lending rate is expected to stay at 6.50% for both the remainder of the year and 2027 [1].
Mexico’s economic data showed some resilience, with the S&P Global Manufacturing PMI rising to 51.3 in June from 49.6 in May, indicating expansion in the sector [2]. In the US, mixed economic data was reported: the June ADP Employment Change was 98K (below May’s 122K and the forecast of 113K), while Challenger Job Cuts in June decreased 53% from 97,006 to 45,849. The ISM Manufacturing PMI dipped to 53.3 in June, below the expected 54, and the Prices Paid Index fell to 73 from 82.1, signaling lower inflation [2].
Looking ahead, traders are focused on the upcoming US Nonfarm Payrolls report. If the data confirms continued US labor market strength, it could reinforce the Federal Reserve’s concerns about persistent inflation and increase the likelihood of further rate hikes, which would narrow the interest rate differential between the US and Mexico. This scenario could drive further upside in USD/MXN. Conversely, if the data disappoints, the pair may consolidate within the 17.00-17.50 range [2]. Technical analysis shows USD/MXN trading above key support levels, with a constructive near-term bias as long as these supports hold [2].
CONCLUSION
The Mexican Peso has come under pressure due to heightened uncertainty surrounding the USMCA and a stronger US Dollar, despite improved inflation expectations and manufacturing data in Mexico. Market participants are closely watching upcoming US labor data, which could further influence the USD/MXN exchange rate and monetary policy expectations.