Mexican Peso broadly steadies even as renewed trade optimism lifts market sentiment

• The Mexican Peso steadies as markets cheer ahead of the announcement of a trade deal between the US and the UK.
• Traders' focus shifts to Mexican inflation data after the Fed´s decision on Wednesday to keep interest rates stable.
• USD/MXN consolidates above support ahead of Banxico rate decision next week.

The Mexican Peso (MXN) swings between mild gains and losses against the US Dollar (USD) on Thursday, amid steady positioning following the Federal Reserve's cautious tone, the upcoming announcement of a trade deal between the United States and the United Kingdom and ahead of Mexico's latest inflation data to be released at, 12:00 GMT.

At the time of writing, USD/MXN is down 0.06%, trading near 19.601, holding steady within a narrow range after failing to break below key support earlier this week.

Cautious Fed, Mexican Inflation data, and Banxico expectations in focus

On Wednesday, the Federal Reserve (Fed) left its benchmark interest rate unchanged at 4.25%-4.50%, with Fed Chair Jerome Powell emphasizing a "wait-and-see" approach in the face of persistent inflation uncertainty and uneven growth. 

Meanwhile, Mexico's inflation report for April is expected to show price growth accelerated to 3.9% (YoY), signaling modest but persistent underlying pressures. If inflation does show an increase in the YoY and the Core Inflation number for April, this may add a level of complexity for Banxico, which meets next week.

Traders are now weighing the implications of the Fed's "wait-and-see" approach, a mild inflation overshoot in Mexico, and broader geopolitical risks. Market attention is shifting toward next week's Banxico meeting, with interest rate differentials, trade policies, and political positioning continuing to shape expectations.

Daily digest: Mexican Peso ignores market cheer as investors brace for inflation data

• Sentiment in markets turned risk-on after news that US President Donald Trump is expected to provide details about a trade deal between the US and the UK on Thursday. Still, traders seem to be keeping the powder dry ahead of key inflation data from Mexico. 
• The Banxico is expected to cut rates by between 25 to50 basis points (bps) on May 15. However, an increase in the Core inflation may limit further easing. 
• Fiscal support measures announced for low-income groups on Monday may add stimulus pressure, potentially weighing on the Peso as rate differentials with the US narrow.
• Mexican President Claudia Sheinbaum reaffirmed support for the USMCA (T-MEC) on Wednesday, amid concerns the Trump administration could push for revisions. The agreement provides duty-free access to the US and Canadian markets, which is key for Mexican exports. Any disruption could undermine trade and Peso sentiment. 
• Global sentiment has improved since Tuesday, following reports of US-China trade talks scheduled this weekend in Switzerland, where Treasury Secretary Scott Bessent and Jamieson Greer will meet Chinese officials. A constructive outcome could support emerging market assets.
• Mexico remains exposed to targeted US tariffs on steel and auto exports, with broader measures threatened under Trump's trade agenda. Further escalation could dampen investor confidence and pressure the Peso.
• Mexico's Q1 Gross Domestic Product (GDP) rose 0.2%, narrowly avoiding recession, while the US economy contracted by 0.3%, missing estimates. Slower US growth raises pressure on the Fed, but policymakers remain cautious on cuts.
• Fed Chair Powell reiterated on Wednesday a data-driven approach, saying, "The right thing to do is await further clarity," and warned that tariff-driven inflation could delay policy easing.
• Recent US tariffs on key Mexican exports - including metals and autos - have added pressure to the external sector, weighing on trade and investment outlooks.

Technical analysis: USD/MXN consolidation persists

USD/MXN is consolidating near the technically significant psychological level of 19.60 at the time of writing on Thursday, which aligns with the 10-day Simple Moving Average (SMA) and the mid-level of the tight range between 19.46 and 19.76 seen since April 18, suggesting fading bullish momentum and indecision among traders.

Support remains anchored at the April low and the bottom of the range at 19.46, with the Relative Strength Index (RSI) flattening near 40, reflecting modestly bearish momentum without entering oversold territory. 

A break below Wednesday's low of 19.56 would re-expose the April low and deepen downside risk.

To regain upward traction, the pair would need a clean daily close above 19.60 and the next psychological resistance level of 19.76, which could open the door toward the 23.60% Fibonacci retracement level of the April move at 19.85, though buyers remain hesitant ahead of next week's Banxico decision.

USD/MXN daily chart