Mexican Peso Strengthens as Dollar Slides: Technicals and Fundamentals Align

The Mexican peso gained ground against the US dollar for the fourth consecutive day on June 26, 2025, closing at 18.87 pesos per dollar, according to official data from the European Central Bank and Banco de México.

The move marked a 0.68% drop in the exchange rate from the previous day and continued a short-term trend that has seen the peso appreciate 1.6% since Friday. The rally reflects a combination of domestic monetary policy, shifting inflation dynamics, and a weakening dollar environment.

Banco de México’s Governing Board cut its benchmark interest rate by 50 basis points to 8.00% in a split decision, signaling a cautious approach to further easing.

Inflation in Mexico slowed to 4.51% year-over-year in the first half of June, but it remains above the central bank’s 3% target. The board revised its inflation forecasts upward for the coming quarters, citing persistent price pressures in goods and services.

The statement removed explicit forward guidance for more aggressive cuts, suggesting future moves may be smaller and more data-dependent. Analysts expect the policy rate to end 2025 between 7.00% and 8.00%, with the next cut likely to be 25 basis points if inflation allows.

In the United States, the economic picture remains mixed. The Federal Reserve left its policy rate unchanged at 4.25–4.50%, as expected, and recent data showed a sharper-than-expected drop in first-quarter GDP.

Jobless claims came in below forecasts, but broader indicators point to a slowing economy. US GDP growth is forecast to slow to 1.5% in 2025, with risks tilted to the downside as tariffs and fiscal uncertainty weigh on demand and investment.

The US Dollar Index fell to 97.30, its lowest level in over three years, reflecting broad-based dollar weakness. Technical analysis of the USD/MXN pair confirms the bearish momentum.

USD/MXN Extends Decline Amid Peso Strength

The daily and four-hour charts show the pair trading below all major moving averages, including the 200-period SMA, which signals a persistent downtrend. The MACD remains negative on both timeframes, with the signal line below zero, indicating sustained selling pressure.

The Relative Strength Index (RSI) sits near oversold territory—around 31 on the four-hour chart and 36 on the daily—suggesting the decline may slow but does not yet point to a reversal.

Bollinger Bands have narrowed, reflecting reduced volatility, and price action remains below the Ichimoku cloud, reinforcing the bearish bias. Key support sits at 18.80, with resistance at 18.98 and 19.08.

Volumes in peso-denominated ETFs have increased, as investors seek higher yields and diversification away from the dollar. The peso’s gains also reflect improved global sentiment after a ceasefire in the Middle East, which has reduced demand for safe-haven assets.

The peso’s recent strength stems from a combination of domestic policy prudence, persistent—though easing—inflation, and a clear technical downtrend for USD/MXN.

The dollar’s weakness, driven by slowing US growth and policy uncertainty, remains the primary catalyst. Market participants will watch upcoming inflation data and central bank signals for the next move.