The Mexican Peso shows mixed performance heading into the weekend as data and events impact other currencies

The Mexican Peso (MXN) traded mixed on Friday across key currency pairs, influenced by economic data and events affecting other major currencies. In the UK, investor reactions to the recent budget from the new Labour government led to higher Gilt yields and a delayed recovery in the Pound Sterling (GBP) on Friday.

The Peso saw slight gains against the US Dollar (USD) following the release of US Nonfarm Payrolls (NFP) data, which showed an increase of only 12,000 in October, significantly below the forecasted 113,000 and September’s revised figure of 223,000. This lower-than-expected payrolls figure increases the likelihood of the Federal Reserve implementing more aggressive interest rate cuts, which could weigh on the Dollar.

Following this, the US Institute of Supply Management’s (ISM) Manufacturing Purchasing Manager Index (PMI) reported a decline to 46.5 in October, down from 47.2 in September and below the expected 47.6. Meanwhile, the ISM Manufacturing Prices Paid Index rose to 54.8 in October from a previous 48.3, above the forecasted 48.5. This uptick in prices suggests persistent inflationary pressures, which could limit the scope of the Fed’s easing measures, potentially offsetting the Dollar impact of the weak NFP data.

Peso Gains Capped by Political Risk Factors

The Peso’s potential for gains remains constrained by ongoing political concerns, including the risk of increased tariffs on Mexican imports should former US President Donald Trump secure re-election. However, analysts note that Trump’s tariff threats may be more rhetorical, given the deep integration of US-Mexico supply chains following decades of free trade. Many goods produced in Mexico incorporate substantial US or Canadian components, with multiple cross-border stages, making a trade conflict economically damaging for both countries.

Domestic Political Developments Add to Concerns

Further Peso risk stems from domestic political shifts, with the Mexican legislature’s recent moves to limit the Supreme Court’s power to suspend or block legislative reforms, as reported by El Financiero. This development raises market concerns about the rule of law in Mexico, potentially impacting foreign investment. Additionally, eight of Mexico’s eleven Supreme Court justices recently announced their resignations, effective August 2025, adding to political uncertainty.

Banxico Rate Cut Still Expected Despite Growth

Despite Mexico’s robust Q3 GDP growth, the Bank of Mexico (Banxico) is expected to proceed with another rate cut in November, according to Kimberley Sperrfechter, Emerging Markets Economist at Capital Economics. A 25 basis point (bps) cut in the current 10.50% key rate could pressure the Peso, as lower rates tend to reduce capital inflows.

Sperrfechter notes that Banxico is likely to continue with its rate-cutting trajectory unless a Trump victory and associated rises in US Treasury yields prompt a stronger Dollar, which could cause Banxico to pause. Christian Borjon Valencia of HubTrading also highlights money market predictions that Banxico might reduce rates by 175 to 200 bps over the next year.

Technical Analysis: USD/MXN Faces Resistance at 20.00

USD/MXN appears to have stalled and pulled back slightly after a “c wave” rise in a bullish “abc” pattern originating from the October 14 low. Though wave c might reach a minimum target of 20.29—the Fibonacci 61.8% extension of wave “a”—resistance around the 20.00 mark poses a challenge for bulls.

USD/MXN 4-hour Chart

The pair remains in an uptrend across short-, medium-, and long-term horizons, trading within a rising channel. Given the adage “the trend is your friend,” a continuation higher remains possible, despite the current resistance.