Mexican Peso Reversal: Three-Day Winning Streak Ends as Banxico Dovishness Weighs

The Mexican peso experienced significant weakness against the US dollar on May 28, 2025, with USD/MXN closing the session around 19.3869-19.4145, marking a notable reversal from the peso’s recent strength.

The peso depreciated between 0.60% to 0.76% during the trading session, with various sources reporting slightly different closing levels. The USD/MXN pair traded in a range between a high of 19.4254 pesos and a low of 19.2591 during the session.

Daily Market Action

The peso’s weakness represented a sharp reversal from its recent momentum, breaking a three-day winning streak that had driven the currency pair to yearly lows.

The currency pulled back from its strongest levels since October, with the pair having hit its 2025 low of 19.243 on May 26 before encountering resistance.

Key Statistics from the Session:

• Largest one-day percentage gain for the dollar since Monday, May 12, 2025
• Dollar up 0.75% over the last three sessions against the peso
• Highest five pm New York rate since Friday, May 16, 2025

Market Drivers and Fundamentals

US Dollar Strength Factors:

• Trade optimism boosted the greenback after President Trump postponed tariffs on EU goods
• The US Dollar Index (DXY) rose 0.29% to 99.89
• Federal Reserve meeting minutes highlighted concerns about rising inflation and unemployment risks

Mexican Peso Weakness Factors:

• Banxico policy dovishness: The central bank downgraded Mexico’s economic growth forecast for 2025 to just 0.1% and cut interest rates by 50 basis points
• Expectations that Banxico will extend its cutting cycle prevailed after latest inflation gauges met expectations
• Consumer confidence data came in below expectations, reflecting growing caution among Mexican households

Technical Analysis

Market technicians noted several key developments:

• The peso’s momentum showed signs of exhaustion after its remarkable 7.52% year-to-date advance
• Relative Strength Index reflected oversold conditions being worked off, climbing from extreme bearish territory
• Bollinger Bands showed the pair testing the lower band before bouncing, suggesting the peso’s strength may have reached temporary limits
• Price action indicated institutional profit-taking after the peso‘s extended rally from April highs above 20.80

Year-to-Date Performance Context

Despite the day’s weakness, the peso maintains significant gains:

• Up 14.16% from its 52-week low of 16.9819 hit on May 29, 2024
• Down 6.92% year-to-date against the dollar
• Down 1.17% month-to-date versus the US currency
• Currently 7.01% off its 52-week high of 20.8489 hit on January 16, 2025

Market Outlook

The trading session revealed institutional repositioning as traders reassessed their peso positions following the currency’s rapid appreciation in recent weeks. Volume patterns showed increased activity, suggesting heightened market interest at these technical levels.

The convergence of dovish Banxico policy expectations, US dollar recovery, and technical profit-taking created a perfect storm for peso weakness on May 28, ending what had been an impressive rally for the Mexican currency.