The USD/MXN currency pair declined to 17.56 on Wednesday, marking a 0.74% drop as risk appetite increased and boosted the Mexican Peso, despite ongoing hostilities in the Middle East for the fifth consecutive day [1]. The positive sentiment was driven by robust US economic data, including a strong ISM Non-Manufacturing PMI for February. The New Orders sub-component surged from 53.1 to 58.6, its highest since September 2024, while the Services index expanded from 53.8 to 56.1, surpassing forecasts of 53.5 [1]. Additionally, the ADP National Employment Change report showed private sector hiring rose by 63K in February, up from January’s revised 11K and above market estimates of 50K [1].
Despite these strong US data points, MXN bulls largely ignored them, focusing instead on upcoming Mexican economic releases, including Gross Fixed Investment on March 5 and February’s final Consumer Price Index (CPI) print on March 9 [1]. The Bank of Mexico (Banxico) released its private analyst poll, projecting headline inflation to end at 4% in 2026 and underlying CPI at 4.17%, up from 4.11% in the previous poll. Economic growth is expected to rise from 1.5% to 1.8% in 2026 and remain unchanged the following year. The USD/MXN exchange rate is forecasted to end at 18.10, down from 18.50 previously, and Banxico is anticipated to cut rates by 50 basis points to 6.50% [1].
Banxico Deputy Governor Galia Borja commented that the central bank has room to reduce rates, citing weaker consumer spending, declining investment, and the appreciation of the Mexican Peso, which is expected to help contain inflationary pressures [1]. Traders are watching for US employment data releases later in the week, which could influence the USD/MXN pair [1].
Technically, the USD/MXN remains downward biased, with the exchange rate sitting above the 20- and 50-day Simple Moving Averages (SMAs) at 17.25 and 17.50, respectively. The Relative Strength Index (RSI) has turned bullish after being below its neutral level since November 2025, indicating sellers are losing strength. A resistance trendline from April 2025 highs near 21.07 was broken on March 3, suggesting buyers are gaining momentum. For a bullish reversal, traders need to clear the 100-day SMA at 17.91, with further resistance at 18.00 and the 200-day SMA [1].
CONCLUSION
The Mexican Peso strengthened against the US Dollar, supported by improved risk appetite and positive US economic data, though traders are focused on upcoming Mexican inflation and investment reports. Banxico's outlook suggests potential rate cuts, with inflation and growth projections slightly higher. The USD/MXN technical setup remains downward biased, but buyers are showing signs of strength, and upcoming US employment data could impact the pair.