- The Mexican Peso weakens as China hikes tariffs to 84% on US goods.
- US 10-year yields jump to 4.513% fueling Fed policy speculation
- Mexico’s March inflation stays on target, leaving room for a possible 50 bps Banxico rate cut in May.
The Mexican Peso (MXN) continued to weaken against the US Dollar (USD) amid intensifying US-China trade tensions, following Washington's announcement of fresh tariffs on Chinese imports and Beijing’s swift retaliation. Market volatility surged, dampening risk appetite and pushing USD/MXN to 20.96, just below a 9-week peak of 21.07, reflecting a 0.64% daily gain.
Trade war concerns remained the dominant market theme, with the US imposing 104% tariffs on Chinese goods at midnight EST. In response, China levied an additional 50% duty on US exports, raising total tariffs to 84%, which further rattled global markets. This escalation also pressured US Treasuries, driving the 10-year yield up to 4.513%. As the yield flirts with the critical 4.50% level, speculation has emerged around a potential “Fed put,” where the Federal Reserve might step in to stabilize financial markets.
Meanwhile, Mexico’s March inflation data came in as expected, keeping within Banxico’s 3% ±1% target range. Core inflation was also in line with projections, according to the national statistics agency INEGI. Despite the slight increase in consumer prices, markets are anticipating a 50 basis point rate cut by Banxico at its May meeting.
Looking ahead, traders are closely monitoring speeches from Fed officials Mary Daly and Neel Kashkari, along with the upcoming release of the Fed’s March meeting minutes and key US inflation data due on Thursday—events that could further shape market sentiment and currency movements.
Daily Digest Market Movers: Mexican Peso Slides as CPI Data Supports Banxico’s Easing Bias
- Mexico’s March Consumer Price Index (CPI) rose 3.80% year-over-year, in line with expectations and slightly higher than February’s 3.77%, according to data from INEGI. Core inflation, which excludes volatile items, also matched projections, coming in at 3.64%. These figures support the view that inflation remains anchored within the central bank’s 3% ±1% target range.
- The Citi Mexico Expectations Survey suggests that Banxico could lower its benchmark interest rate to 8% by the end of the year. The same survey forecasts the USD/MXN exchange rate to settle around 20.90, with inflation expected to hover at 3.7%—well within the target band. Meanwhile, Mexico’s GDP growth projection for 2025 was revised downward to 0.3% from the previous estimate of 0.6%.
- Banxico Governor Victoria Rodríguez Ceja emphasized that the central bank remains vigilant about the potential spillover effects from U.S. trade policy, reiterating inflation control as the institution’s top priority.
USD/MXN Technical Outlook: Peso Struggles as Dollar Tests Key Resistance
The Mexican Peso remains under pressure, with USD/MXN hovering near the 21.00 level amid heightened volatility that continues to weigh on emerging market currencies. The technical setup indicates an intact uptrend. A break above the daily high of 21.07 could pave the way for a test of the year-to-date high at 21.28, followed by potential resistance at 21.50 and even 22.00 if momentum accelerates.
On the flip side, any meaningful retreat below 20.50 may find initial support at the confluence of the 50-day and 100-day Simple Moving Averages (SMAs), currently positioned around 20.34–20.36. Should this zone fail to hold, the psychological level of 20.00 will be the next key floor for the pair.
