Mexican Peso Strengthens on Hopes of a U.S.–China Trade Deal
Both countries reached a framework agreement on Sunday, setting the stage for presidents Donald Trump and Xi Jinping to finalize a deal.
Quick overview
- The Mexican peso strengthened against the dollar, closing at 18.3961 pesos per dollar, a gain of 0.24%.
- Optimism over U.S.-China trade talks and expectations of a Federal Reserve rate cut supported the peso's performance.
- Despite the gains, concerns over ongoing trade tensions with the U.S. and signs of a domestic economic slowdown capped the peso's upside.
- The peso is trading within a narrow range, with key support at 18.30, indicating potential for recovery if positive developments occur.
The Mexican peso strengthened against the dollar on Monday, lifted by improved risk appetite and growing optimism over a potential easing of trade tensions between the United States and China.
The exchange rate closed at 18.3961 pesos per dollar, compared with 18.4411 on Friday, according to official data from Banco de México (Banxico). The move represents a gain of 0.24% for the local currency. During the session, the dollar traded between 18.4485 and 18.3611 pesos. Meanwhile, the U.S. Dollar Index (DXY) slipped 0.13% to 98.82 points.
Optimism Over U.S.–China Talks
Top economic officials from both countries reached a framework agreement on Sunday, setting the stage for presidents Donald Trump and Xi Jinping to finalize a potential deal this week in South Korea. The renewed optimism supported emerging-market currencies, including the peso, which touched an intraday low of 18.36.
Fed Rate Cut Expectations Support Carry Trade
The peso also benefited from speculation that the Federal Reserve will continue its easing cycle at this week’s policy meeting. Futures tracked by CME’s FedWatch Tool show a 97.8% probability of another 25-basis-point rate cut, encouraging flows into higher-yielding assets.
Analysts note that the peso remains one of the most liquid carry-trade plays among emerging-market currencies, as investors seek returns in high-yield environments.
Gains Capped by Local Concerns
Still, upside momentum was limited by persistent trade tensions with the U.S. President Claudia Sheinbaum said the timeline for resolving pending trade issues with Washington would be extended by several weeks.
While foreign investors remain attracted to Mexico’s high interest rates, they are increasingly cautious amid signs of domestic economic slowdown and ongoing uncertainty in U.S.–Mexico trade relations.
Technical Outlook
The peso continues to trade within a narrow consolidation range with low volatility, holding above the 50-day moving average near 18.50. The 18.30 level remains the next key support zone to watch, suggesting the recovery bias could persist if positive catalysts materialize.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save