Mexican Peso erases gains against US Dollar on improved US consumer sentiment

• USD/MXN erases gains after positive Michigan Sentiment drives the US Dollar higher.
• The Mexican Peso remains vulnerable to broader risk sentiment, capping USD/MXN losses.
• US inflation moderates, but the Fed may not be willing to change its tone just yet.

The Mexican Peso (MXN) is showing renewed signs of weakness against the US Dollar after Michigan Expectations and Sentiment provided relief for the Greenback.

At the time of writing, USD/MXN is trading between the 19.30 and 19.40 psychological levels, with the 10-day and 20-day Simple Moving Average (SMA) providing additional support and resistance for the pair.

US Michigan sentiment data weighs on the Peso, limiting USD losses

The University of Michigan’s preliminary data for May, released on Friday, showed a modest improvement in consumer sentiment and expectations, offering a mixed but slightly more optimistic view of US household outlooks. 

The Consumer Sentiment Index rose to 52.2, up from 50.8, indicating a small rebound in overall confidence. Meanwhile, the Consumer Expectations Index rose to 47.9 from 46.5, indicating that while consumers remain cautious about the future, their expectations have improved marginally. 

Both readings remain historically low but point to a slight easing in pessimism, likely reflecting a stable labor market and slower inflation in recent months.

• Friday’s US Personal Consumption Expenditures (PCE) Price Index for April showed a MoM increase of 0.1%, slightly up from March’s unchanged rate. The YoY figure decreased to 2.1% from 2.3%. The core PCE rose to 2.5%, down from 2.7% in the previous month. This data suggests a dovish outlook for future US interest rates.
• The Federal Reserve’s (Fed) preferred inflation measure is closely monitored by policymakers, investors, and currency markets. Current data indicates that price pressures are easing, which influences expectations regarding future interest rates.
• In Mexico, the Jobless Rate for April, released at 12:00 GMT, printed at 2.5%, in line with analyst forecasts, despite a rise from 2.2% in March. Employment trends serve as a leading indicator of economic growth.
• The Banxico Minutes from the May Meeting on Thursday showed that most members see downside risks to economic activity; all members flagged concerns over US trade policy uncertainty. This reinforces a dovish bias from the central bank, with more easing potentially on the table.
• On Wednesday, Banxico’s Quarterly Report revealed that the central bank slashed its 2025 Gross Domestic Product (GDP) growth forecast to 0.1% from 0.6%, citing rising domestic recession risks. Market attention turns to policy calibration amid deteriorating growth outlook.
• The Minutes from the May Federal Open Committee (FOMC) meeting were released on Wednesday. In the report, Fed officials emphasized increased uncertainty and supported a cautious approach. 
• USD/MXN remains highly sensitive to data surprises, especially when they carry implications for monetary policy or broader global sentiment. Price action is likely to be reactive, with potential for sharp swings should actual data deviate from expectations.

Mexican Peso technical analysis: USD/MXN bulls make a comeback

The USD/MXN is currently trading in a tight range between the 10-day Simple Moving Average (SMA) at 19.31 and the 20-day SMA at 19.42, reflecting indecision after a sustained downtrend. 

A break above the 20-day SMA would bring the 78.6% Fibonacci retracement level of the October–February rally (near 19.58) into focus, and a successful move beyond that could open the door to the 23.6% Fib of the April–May decline around 19.63. The Relative Strength Index (RSI) has risen to 45, indicating that bearish momentum is fading, although it has not yet signaled bullish strength. 

On the downside, a break below the 10-day SMA and psychological support at 19.30 would reassert bearish control, potentially pushing prices down to prior resistance at 19.28 and the May low at 19.18. This makes the current range a critical battleground for short-term direction.

USD/MXN daily chart