Mexican Peso surges as US Dollar gets battered on Moody's news

• Mexican Peso appreciates as USD/MXN hovers near 19.30, with traders eyeing Mexico GDP and upcoming US data.
• Banxico's Governor maintains a dovish tone, while Mexico's IOAE suggests economy stalled in April.
• Moody's downgrades US debt to AA1, citing fiscal inaction; USD broadly weaker amid long-term debt concerns.

The Mexican Peso (MXN) advanced by 0.60% against the US Dollar (USD) on Monday, as investors shifted away from the Greenback amid Moody's International rating agency's review of the US government's debt prospects. USD/MXN trades at 19.32 after hitting a daily high of 19.48.

Market appetite has improved as the session progresses, as traders brushed aside Moody's news. The international agency downgraded the US government's debt rating from AAA to AA1, citing that the inaction by successive US administrations and Congress has contributed to the country's worsening fiscal position, raising concerns over long-term debt sustainability.

Banco de Mexico (Banxico) Governor Victoria Rodriguez Ceja crossed the newswires and remained dovish. News from Mexico's National Statistics Agency warned that the economy likely stalled in April, according to the Timely Indicator of Economic Activity..

In the meantime, some Federal Reserve (Fed) officials crossed the newswires.

Traders are eyeing the release of Mexican Retail Sales and Gross Domestic Product (GDP) figures. On the US front, investors will digest the S&P Global Flash PMI figures, as well as housing and jobs data.

Mexican Peso daily market movers: Peso poised to extend gains

• Banxico's Governor Victoria Rodriguez Ceja said that monetary policy would remain restrictive but hinted that there is room to reduce the benchmark interest rate, she said in an interview published by El Financiero.
• Last week, Banxico reduced its rates to 8.50%, citing the need for additional calibration of monetary policy and anticipating further easing. The central bank forecasts that headline inflation will converge to the 3% goal by Q3 2026.
• INEGI revealed the results of the Timely Indicator of Economic Activity (IOAE), with figures remaining unchanged at 0% in April compared to March's -0.2% MoM contraction.
• Analysts surveyed by El Economista project Mexico's main reference rate at around the 7.25% to 7.75% range by the end of 2025.
• Fed officials Raphael Bostic, John Williams and Philip Jefferson agreed that the current monetary policy stance remains appropriate due to uncertainty regarding tariffs. Williams noted that economic data has been solid and echoed Jefferson's concerns about the tariffs potentially triggering a re-acceleration in inflation. Bostic projects one interest rate cut in 2025.
• The December 2025 fed funds rates futures contract shows that market players expect 52 basis points of easing.

USD/MXN technical outlook: Mexican Peso surges as USD/MXN poised for daily close below 19.35

USD/MXN remains downward biased, but sellers have failed to refresh the year-to-date (YTD) lows of 19.29 hit on May 14, which, once cleared, could pave the way for further downside. The Relative Strength Index (RSI) shows that bears remain in charge. That said, the exotic pair could retest the 19.00 figure, last hit on August 21, 2024.

In that outcome, USD/MXN next support would be 18.50, followed by the 18.00 psychological mark. Conversely, buyers must reclaim 19.50 to remain hopeful of hitting higher prices, with the first resistance seen at 19.53, the 20-day Simple Moving Average (SMA), followed by the 50-day SMA at 19.90.