US growth and hot inflation revive Fed rate hike bets as Mexican Peso falls

• A rise of over 1.20% takes USD/MXN to 18.86, bringing the psychological 19.00 mark into view.
• Growth in US GDP reaches 3.4% as Core PCE inflation picks up to 3.1%.
• With Mexico's GDP release ahead, Banxico's Borja backs interest rates of 6.50%.

US data reinforcing expectations of another Federal Reserve rate rise in 2026 put pressure on the Mexican Peso on Thursday. The emerging-market currency is on course to lose over 1.20% against the US Dollar, with USD/MXN at 18.86, and looks set to finish the week lower.

USD/MXN advances towards 19.00 as robust US growth and elevated inflation weigh on Peso before Mexico's GDP

Interest rates were held steady by the Federal Reserve on Wednesday, while Fed Chair Kevin Warsh offered little forward guidance. He did, however, disclose that 2027 would have seven monetary policy decisions and 2028 would have six.

Following the decision and Warsh's comments, USD/MXN slipped towards 18.60. Thursday's figures subsequently prompted a rebound in the exotic currency pair.

September's US Core PCE inflation reading came in at 3.1%, matching expectations and rising from 3% the month before. Annual US economic growth reached 3.4%, surpassing both the 2.2% recorded in Q2 2026 and the 3.2% forecast. A strong jobs report complemented those releases: jobless claims fell to 194K from 195K in the week ending October 24, rather than rising to 199K as forecast.

Against this backdrop, money markets assign a 76% probability to a Fed rate rise, considerably below the 84% priced in a day earlier. The decline suggests investors have become less confident that the Fed will increase interest rates.

Although Mexico's economic calendar was empty, Bank of Mexico (Banxico) Deputy Governor Galia Borja described interest rates of 6.50% as a “good monetary position,” with inflation continuing to ease towards Banxico's 3% target. While acknowledging that inflation was heading in the right direction, Borja stressed that “the job is not yet done.”

Mexico's Q3 2026 Gross Domestic Product (GDP) figures are due on Friday. Economists expect quarterly growth of 0.7%, with the annual growth rate forecast to increase to 2.5% from 2.1%.

USD/MXN Price Forecast: Bullish technical bias persists

Trading at 18.8635 on the daily chart, USD/MXN retains its near-term bullish bias, with spot comfortably above the cluster of three simple moving averages around 17.7104. The pair also remains well clear of the key structural support at 16.8866. Meanwhile, the Relative Strength Index (14), at roughly 71.7, is entering overbought territory. This suggests the latest rally is looking stretched, although solid underlying demand continues to support it.

The cluster of 50/100/200-day simple moving averages around 17.71 provides the first downside support. Further below lies the horizontal base at 16.89, where buyers would be expected to regain control following a deeper retreat. The current dataset offers no clearly defined resistance above the market, keeping the pair in uncharted territory to the upside. Any correction is therefore likely to stem initially from overbought momentum rather than an established price ceiling.

(The technical analysis of this story was written with the help of an AI tool. Know more.)