The Mexican Peso weakens as the US Dollar gains ground ahead of the release of the Fed Minutes

The Mexican Peso (MXN) holds relatively steady against the US Dollar (USD) on Wednesday, trading near year-to-date highs as investors await the release of the Federal Reserve’s (Fed) May FOMC meeting minutes. The report is expected to provide insight into the Fed’s decision to maintain current interest rates and its assessment of economic risks, particularly in light of President Trump’s expanding tariff policies.

Fed officials have adopted a cautious approach, choosing to monitor the effects of trade developments before making further policy adjustments. According to the CME FedWatch Tool, markets are pricing in a 49.1% probability of a rate cut in September, while expectations for the June and July meetings suggest the Fed will hold rates at 4.25%-4.50%.

Mexican Peso Daily Digest: USD/MXN Awaits Direction from Banxico and US Data

• The Mexican Peso remains in focus ahead of key economic events, with the USD/MXN pair largely driven by movements in the US Dollar. On Thursday, Mexico’s central bank, Banxico, will publish the minutes from its May 15 policy meeting, where it implemented a seventh consecutive rate cut.
• Markets will closely scrutinize the minutes for any indications of a possible pause in the easing cycle, especially as policymakers assess growing external risks, including renewed US tariff threats.
• The same day, attention will also turn to the US, where a batch of high-impact economic data is due. These include the second estimate of Q1 GDP and weekly Initial Jobless Claims—both integral to the Federal Reserve’s assessment of the economic landscape.
• On Friday, the spotlight will shift to April’s Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, along with the final reading of the University of Michigan Consumer Sentiment Index.
• Given the Fed’s commitment to a “data-dependent” approach, these indicators will be crucial in shaping expectations for future policy moves. On Tuesday, the US Dollar found modest support after US Consumer Confidence data showed a notable rebound, ending five consecutive months of declines. The improvement in sentiment was largely linked to optimism surrounding the US-China trade agreement.

Mexican Peso Technical Analysis: USD/MXN Faces Trendline Resistance Ahead of Fed Minutes

The USD/MXN pair remains confined within a downward trend, with price action capped below the 20-day Simple Moving Average (SMA) at 19.44. Following a fresh year-to-date low of 19.18 reached on Monday, a slight recovery in the US Dollar has pushed the pair up to test trendline resistance originating from the April decline, currently near 19.29.

Momentum indicators suggest continued bearish pressure, as the Relative Strength Index (RSI) hovers around 39, reflecting weak momentum but stopping short of oversold conditions.

As the downtrend holds firm, a decisive break below the 19.20 level could focus market attention on the October 2024 low at 19.11, which stands as the next key support. A sustained move beneath that point may pave the way for further declines toward the psychological 19.00 mark. Conversely, any rebound attempt will first need to overcome the 20-day SMA resistance at 19.44 to shift short-term market sentiment toward bullish territory.

USD/MXN daily chart