Why is the Mexican Peso tumbling amid US midterm jitters and a factory slowdown?

USD/MXN jumps more than 1.40% to 18.84 as uncertainty surrounds US elections.
Manufacturing activity in Mexico contracts as PMI drops to 49.5.
Dollar demand strengthens on robust US job openings and Factory Orders data.

Caution among investors weighs on the Mexican Peso (MXN) against the US Dollar (USD) on Tuesday as they await the US midterm election results and clarity on the composition of the US Congress. With election developments continuing to unfold, USD/MXN is trading at 18.84, a gain of more than 1.40%.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Why is USD/MXN rebounding sharply as US election uncertainty, weak Mexican manufacturing and firm US data weigh on the Peso?

Wall Street is on course to close higher, reflecting an upbeat market mood. Currency markets, however, show the Greenback strengthening against emerging-market currencies such as the Peso.

A modest 0.05% rise to 101.85 has helped the US Dollar Index (DXY), which tracks the Dollar against six currencies, recover its earlier losses. The Mexican currency remains under pressure from Middle East tensions, their effect on energy prices and uncertainty over the US midterm election outcome.

Mexico’s manufacturing sector recorded a contraction in business activity, according to the latest data. September’s S&P Global Manufacturing Purchasing Managers Index (PMI) fell to 49.5 from 50.3. Businesses blamed lower production on “cash flow difficulties, inflationary pressures, raw material shortages and subdued sales.”

In its newly released survey of private economists, the Bank of Mexico (Banxico) said it expects inflation to stay within its 3% plus or minus 1% range. Analysts also anticipate economic growth below the government’s 2% GDP forecast in both this year and next, with Banxico keeping interest rates unchanged through the end of 2027.

September’s US Job Openings and Labour Turnover Survey (JOLTS) showed an increase to 7.5 million from 7.19 million, a 4.5% rise over the previous month. Separately, US Census Bureau data showed that Factory Orders growth accelerated to 1.8% MoM in September from 0.3%.

Attention among USD/MXN traders remains on the US midterm elections. According to Polymarket, Democrats have a 75% probability of winning the Senate and a 96% probability of taking control of the House.

USD/MXN Price Forecast: Which technical levels matter next?

Chart Analysis USD/MXN — Daily chart for USD/MXN

Trading at 18.8383 on the daily chart, USD/MXN retains a bullish short-term outlook. Spot remains well above the cluster of three simple moving averages, most recently near 17.82, supporting the underlying upward trend. Horizontal support at 16.89 also lies comfortably below the pair. Meanwhile, the Relative Strength Index (14), at around 65 after easing from earlier overbought readings, signals strong bullish momentum without reaching an extreme.

The latest closing level near 18.84 provides the first support on a pullback. Below that, the 50/100/200-day simple moving average zone around 17.82 comes into focus, followed by the more distant structural support along the horizontal line at 16.89. Further gains would encounter a significant technical hurdle at the descending resistance trend line, currently projected near 21.08.

(An AI tool assisted in preparing the technical analysis for this article. Find out more.)

Mexican Peso: Frequently asked questions

Which factors shape movements in the Mexican Peso?

Among Latin American currencies, the Mexican Peso (MXN) records the highest trading activity. Its value largely reflects Mexico’s economic performance, central bank policy, foreign investment inflows and the volume of remittances from Mexicans living overseas, especially in the United States. Geopolitical developments can influence MXN as well. Nearshoring, for instance, involves companies moving manufacturing capacity and supply chains nearer to their home countries. This process is viewed as a catalyst for the Peso because Mexico is regarded as a major manufacturing hub in the Americas. Oil prices are another driver of MXN, given Mexico’s position as a major exporter of the commodity.

How can Banxico’s policy decisions affect the Mexican Peso?

Keeping inflation low and stable is the primary mandate of Mexico’s central bank, Banxico. It aims for inflation at or near 3%, the midpoint of its 2% to 4% tolerance band, and sets interest rates accordingly. If inflation becomes too high, Banxico seeks to contain it through rate increases. Higher borrowing costs for households and businesses then temper demand and broader economic activity. For the Mexican Peso (MXN), higher interest rates are usually supportive: the resulting rise in yields makes Mexico more attractive to investors. Lower rates, by contrast, generally weigh on MXN.

What role do economic releases play in Mexican Peso valuations?

By helping investors gauge economic conditions, macroeconomic releases can influence the valuation of the Mexican Peso (MXN). Strong growth, low unemployment and high confidence signal a healthy Mexican economy and support MXN. Such conditions attract additional foreign investment and may also prompt the Bank of Mexico (Banxico) to raise interest rates, especially when economic strength is accompanied by elevated inflation. Weak data, on the other hand, are likely to lead to depreciation in MXN.

How does the Mexican Peso respond to changes in global risk appetite?

Risk-on conditions generally favour the Mexican Peso (MXN), an emerging-market currency. When investors judge wider market risks to be low, they are more willing to take on higher-risk investments. In contrast, market turbulence or economic uncertainty usually puts pressure on MXN, as investors sell riskier assets and move into more stable safe havens.