Mexican Peso holds steady, poised for weekly losses

• USD/MXN flats near 19.58 as soft Mexican manufacturing and Banxico's dovish tilt weigh against strong US jobs data.
• Mexico's dismal data suggests the economic slowdown might continue as PMI hits three-year low, business confidence deteriorates.
• Banxico is seen cutting rates in May, widening policy gap with Fed and pressuring Peso outlook.

The Mexican Peso (MXN) remained firm against the US Dollar (USD), though it is poised to finish the week with losses of over 0.40% after economic data revealed in Mexico painted a gloomy economic outlook, despite the fact that the economy surprisingly grew in the first quarter of 2025. Also, solid US jobs data tempering recession fears kept USD/MXN near the 19.58 mark virtually unchanged.

Mexico's economic docket revealed that business confidence deteriorated for the third consecutive month in April. At the same time, S&P Global revealed that manufacturing activity for the same period plummeted to its lowest level in three years, contracting for the fourth consecutive month according to the Manufacturing PMI index.

Across the northern border, positive trade news between the US and China capped the USD/MXN pair gains as the Greenback posted some losses. On the data front, April's Nonfarm Payrolls exceeded estimates and trailed the previous reading. Alongside this, the Unemployment Rate stands pat, highlighting the US labor market's robustness.

The Federal Reserve (Fed) is expected to hold rates unchanged at next week's meeting. On the contrary, Banco de Mexico (Banxico) has signaled its intentions to continue easing monetary policy at its May meeting to support the economy, even though inflation hasn't quite reached the 3% goal. Therefore, the divergence between both central banks could pressure the Peso and boost the US Dollar prospects.

Daily digest market movers: Mexican Peso unfazed by bad data

• Mexico's Business Confidence in April came at 48.5, down from 49.7 revealed by the Instituto Nacional de Estadistca Geografia e Informatica (INEGI). This and S&P Global Manufacturing PMI contraction for the same period, dipping from 46.5 to 44.8, hints that the economic outlook in the future looks worse than expected.
• Although the latest Gross Domestic Product (GDP) figures surprised the markets, showing that the economy grew, tariffs imposed on Mexican products, along with the reduction of the budget, would keep the country's financial sector stressed.
• US Nonfarm Payrolls (NFP) rose by 177K in April, beating expectations of 130K, though slightly below the downwardly revised 185K from March. The stronger-than-expected print contrasted with the weaker ADP employment report earlier in the week, which suggested slower hiring momentum.
• The Unemployment Rate held steady at 4.2%, in line with forecasts. The stable labor data may give the Federal Reserve reason to hold off on policy easing in the near term.

USD/MXN technical outlook: Mexican Peso remains bullish as USD/MXN stays below 200-day SMA

USD/MXN downtrend remains in place, though recent price action suggests a potential bottoming around the 19.46-19.50 range. The Relative Strength Index (RSI) flatlines near the 30 level, signaling seller exhaustion.

A drop below the YTD low at 19.46 would expose the 19.00 psychological level, and further weakness could lead to a test of the June 28 high-turned-support at 18.59.

On the flip side, moving above the 20-day SMA at 19.88 and the 200-day SMA near 19.97 would shift momentum in favor of buyers, opening the door to reclaim the 20.00 mark, followed by the 50-day SMA at 20.12.