Mexican Peso holds gains as US House approval of Trump's Big, Beautiful Bill rattles markets

• The Mexican Peso remains firm, buoyed by a weaker Greenback after Trump's tax and spending bill was approved by the US House of Representatives.
• Mexican Trade data and Fed speakers ahead of US Housing data remain key for the USD/MXN in the near term.
• USD/MXN bears remain in control, with the May low proving the next technical hurdle.

The Mexican Peso (MXN) is benefiting from the renewed US Dollar (USD) weakness on Friday, which is driven by concerns over the health of the United States (US) deficit after the US House of Representatives voted in favour of Trump's administration tax and spending bill.

As investors assess the impact of the bill on the US debt burden, the future growth prospects, and interest-rate expectations, USD/MXN remains below prior psychological support at 19.30, which is providing immediate resistance at the time of writing.

Fed speakers and Mexican Trade data to drive volatility

Mexico's Trade Balance data released on Friday showed a deficit of $0.088 billion, less than the $0.16 billion forecast by analysts. The report, published by the National Institute of Statistics and Geography of Mexico (INEGI) on a monthly basis, reflects the difference between a country's exports and its imports. Despite posting a narrower-than-expected trade deficit, it still represents a swing from the $3.442 billion surplus reported in March. 

For the United States (US), speakers of the Federal Reserve (Fed) will continue to provide comments about interest rate expectations. Investors will be monitoring the comments closely for signs of any changes in when the Fed may cut interest rates.

At 14:00 GMT, Housing data will be released, reflecting the demand for housing in April, perceived as a leading indicator of spending and demand for credit.

Mexican Peso daily digest: US fiscal concerns linger.

• Fiscal concerns surrounding the passing of Trump's proposed tax bill have increased. The "Big, Beautiful Bill" is expected to increase the US federal deficit by $3.8 trillion over the 2026-2034 period, according to the US Congressional Budget Office.
• The recent rating downgrade by Moody's agency, combined with President Trump's tax bill, has weighed on the US Dollar. A rating downgrade reflects reduced faith in the US to repay its debt.
• Fed speakers on Friday include St. Louis Fed President Alberto Musalem, Kansas City Fed President Jeff Schmid, and Governor Lisa Cook, who are all voting members of the Fed. 
• The CME FedWatch tool indicates a 94.7% probability that interest rates will remain in the current range of 4.25%-4.50% in June, with analysts not expecting any Fed rate cut until September.
• With the Bank of Mexico (Banxico) cutting interest rates by 0.50% at its May meeting, the divergence in interest rate differentials between both countries should support demand for the USD.
• However, on Thursday, Mexico's 1st half-month inflation data came in higher than expected at 0.09%, reflective of an increase in price pressures.
• Thursday's data also showed that Mexico's Growth Domestic Product (GDP) grew by 0.2% on quarter and by 0.8% on year, in line with market expectations. 
• With the economy seen as resilient despite increased tariffs from the US, it could reduce pressure on Banxico to continue cutting rates in the near term.

Mexican Peso technical analysis: USD/MXN trades near 19.30 

USD/MXN remains near 19.30, trading below the 10-day and 20-day Simple Moving Average (SMA) at the respective levels of 19.39 and 19.49. With a break above 19.30 potentially bringing these levels into play, a move below would suggest that sellers are in control of the trend.

The Relative Strength (RSI) indicator is at 37.77, showing downside momentum is firm.

Should the downtrend hold, a retest of the May low of 19.23 would bring the October low of 19.11 into sight, with the next layer of support at the next psychological level of 19.00.

USD/MXN daily chart