USD/MXN remains below 19.00 as Trump grants Mexico 90-day reprieve from 30% tariff hike
- USD/MXN holds losses ahead of US Nonfarm Payrolls due on Friday.
- President Trump granted Mexico a 90-day reprieve from the planned 30% tariff hike on many goods.
- The US Dollar advanced after the PCE report indicated that the Fed may delay rate cuts until at least October.
USD/MXN inches lower after registering gains in the previous five consecutive days, trading around 18.90 during the Asian hours on Friday. The pair struggles as the Mexican Peso (MXN) could gain some ground following the US President Donald Trump’s decision to allow more time to negotiate a broader trade deal by granting Mexico a 90-day reprieve from higher tariffs of 30% on many goods.
The United States (US) spared Mexico’s non-automotive and non-metal goods, which are compliant with the US-Mexico-Canada Agreement on trade, from a 30% tariff. This decision came after a Thursday call between Trump and Mexican President Claudia Sheinbaum. On Thursday, Sheinbaum posted on X, "We avoided the tariff increase announced for tomorrow," and added that the Trump call was "very good," per Reuters. Additionally, Trump stated on Truth Social that Mexico has agreed to immediately eliminate its Non-Tariff Trade Barriers.
However, the United States would continue to levy a 50% tariff on Mexican steel, aluminum, and copper. A 25% tariff will remain on Mexican autos and non-USMCA-compliant goods not compliant with the USMCA. These tariffs are tied to measures related to the US fentanyl crisis.
President Trump imposed higher tariff rates on US trading partners set to go into effect on August 1. On Thursday, Trump signed an executive order imposing tariffs ranging from 10% to 41% on US imports from dozens of countries and foreign locations, including Canada, India, and Taiwan, that failed to reach the trade deals deadline, per Reuters.
The USD/MXN pair may appreciate as the US Dollar (USD) may regain its ground, as the recent US Personal Consumption Expenditure (PCE) Price Index report suggested that price pressures would increase in the second half of 2025 and delay the US Federal Reserve’s (Fed) interest rate cuts until at least October. Traders await the United States (US) Nonfarm Payrolls (NFP), due later in the North American session, which is expected to hold in positive territory in July.
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.