Factory slowdown and US midterm anxiety send Mexican Peso tumbling

Over 1.40% higher: USD/MXN reaches 18.84 as US election uncertainty weighs.
49.5 PMI reading puts Mexico's manufacturing sector in contraction.
Dollar demand strengthens on robust US job openings and Factory Orders.

USD/MXN stands at 18.84, more than 1.40% higher. The Mexican Peso (MXN) weakens against the US Dollar (USD) on Tuesday as developments in the US midterm elections keep investors cautious. Markets await both the results and the resulting composition of the US Congress.

18.84 USD/MXN rebound: election uncertainty, weak Mexican manufacturing and firm US data weigh on Peso

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

Wall Street is on course to close higher amid positive market sentiment. Across currency markets, the Greenback is strengthening against emerging-market currencies, with the Peso among those losing ground.

Having reversed earlier losses, the US Dollar Index (DXY) edges up 0.05% to 101.85. The index tracks the Dollar against six currencies. For the Mexican currency, pressure comes from Middle East tensions and their effects on energy prices, alongside uncertainty over the US midterm election outcome.

Mexico's manufacturing data pointed to a contraction in business activity. September's S&P Global Manufacturing Purchasing Managers Index (PMI) fell to 49.5 from 50.3. Explaining the decline in output, companies cited “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 inflation was expected to stay within its 3% plus or minus 1% range. Analysts also forecast economic growth below the government’s 2% GDP projection for both this year and next. They expect Banxico to leave rates unchanged through the end of 2027.

September's US Job Openings and Labour Turnover Survey (JOLTS) showed openings increasing to 7.5 million from 7.19 million, a 4.5% month-on-month rise. Separately, US Census Bureau figures showed Factory Orders growth accelerating 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.

18.8383 USD/MXN: Technical price outlook

Chart Analysis USD/MXN — USD/MXN: daily price chart

At 18.8383 on the daily chart, USD/MXN retains a near-term bullish bias. Spot remains well above the cluster of three simple moving averages, with its latest reading near 17.82 supporting the underlying uptrend. Horizontal support at 16.89 also lies comfortably below the pair. Meanwhile, the Relative Strength Index (14) is around 65, indicating solid rather than extreme bullish momentum following a retreat from earlier overbought levels.

The latest close, around 18.84, provides initial downside support. Below that sits the 50/100/200-day simple moving average zone near 17.82, followed by a more distant structural floor at the 16.89 horizontal line. Further gains would encounter a major technical obstacle at the descending resistance trend line, currently projected near 21.08.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Mexican Peso: key questions answered

Mexican Peso: principal market drivers

Among Latin American currencies, the Mexican Peso (MXN) is the most actively traded. Its valuation largely reflects Mexico’s economic performance, central bank policy, foreign investment inflows and remittances from Mexicans living overseas, especially in the United States. Geopolitical developments can influence MXN as well. Nearshoring, in which companies move manufacturing capacity and supply chains closer to their home countries, is viewed as a potential catalyst for the currency because Mexico is regarded as a major manufacturing hub in the Americas. Oil prices are another driver, given Mexico’s role as a major exporter of the commodity.

Banxico policy: implications for 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 by increasing rates. Higher borrowing costs for households and businesses curb demand and cool the wider economy. For the Mexican Peso (MXN), higher rates are usually supportive: increased yields enhance Mexico’s appeal to investors. Lower rates, by contrast, generally put downward pressure on MXN.

Economic data: effects on Mexican Peso valuations

By helping investors gauge the economy’s health, macroeconomic releases can influence the valuation of the Mexican Peso (MXN). Strong growth, low unemployment and robust confidence in Mexico support the currency. Such conditions attract additional foreign investment and may also prompt the Bank of Mexico (Banxico) to raise interest rates, especially when economic strength coincides with elevated inflation. Weak figures, in contrast, are likely to lead to MXN depreciation.

Risk sentiment: support and pressure for the Mexican Peso

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 hold higher-risk investments. During market disruption or economic uncertainty, the reverse typically applies: investors sell riskier assets and move into more stable safe havens, tending to weaken MXN.