Mexican Peso seesaws as US Dollar bulls return ahead of the release of Banxico Minutes

• The Mexican Peso broadly steadies on renewed US strength following a court ruling to block Trump's tariffs.
• Traders focus on Banxico Meeting Minutes and US Jobless Claims as potential next catalysts for the USD/MXN pair.
• The USD/MXN breaks prior psychological resistance at 19.40.

The Mexican Peso (MXN) swings between mild gains and losses against the US Dollar (USD) on Thursday as markets digest a court ruling that blocks US President Donald Trump from imposing tariffs on imports. 

At the time of writing, USD/MXN is trading in a tight range with psychological support firming at 19.40.

A US federal court ruled against President Trump's sweeping "Liberation Day" tariffs, striking them down as unlawful under emergency powers. While the decision lifted global risk sentiment, it also boosted the US Dollar and highlighted ongoing uncertainty around US-Mexico trade policy, further weighing on the peso.

Also supporting the US Dollar, the Federal Reserve's (Fed) Minutes from the May meeting revealed on Wednesday that policymakers are prepared to keep interest rates elevated for longer if inflation pressures persist. 

At the same time, Banco de México's (Banxico) Quarterly Report flagged rising domestic recession risks, cutting the 2025 GDP growth forecast sharply to 0.1% and reinforcing a cautious policy outlook. 

On Thursday, key economic releases for the US include the second estimate of US Q1 Gross Domestic Product (GDP) and Weekly Initial Jobless Claims, which are expected to influence the Federal Reserve's policy outlook. Meanwhile, in Mexico, attention shifts to the Bank of Mexico's meeting Minutes, which are expected to provide deeper insight into policymakers' thinking following the recent downgrade in growth projections. 

Mexican Peso daily digest: USD/MXN awaits signs from Banxico 

• At the May meeting, Banxico Governor Victoria Rodriguez Ceja stated that the governing board estimates it could continue calibrating the monetary stance and consider adjusting it by a similar amount as the May 50-bps cut. The Meeting Minutes, to be released at 15:00 GMT, may provide additional clues around Banxico's next move in their attempt to balance inflation and economic growth.
• On Wednesday, the tone of the Federal Reserve Open Market Committee (FOMC) Minutes aligned with market expectations, as policymakers emphasized a need to assess the full impact of trade measures and inflationary pressures before adjusting policy. "Participants agreed that uncertainty about the outlook had increased and it was appropriate to take a cautious approach to monetary policy," the Minutes said.
• According to the CME FedWatch Tool, market participants are currently pricing in a 48.3% chance of a rate cut in September. For June and July meetings, the expectation is that the Fed will maintain its benchmark rate at the current range of 4.25%-4.50%.
• The Banxico Q1 Quarterly Report for January-March acknowledged rising recession risks for the Mexican economy, downgrading the 2025 GDP growth forecast from 0.6% to 0.1%. Despite the downgrade, the central bank maintained a cautious policy stance. It stated, "The reference rate is expected to remain in restrictive territory for an extended period," suggesting that future cuts will be gradual and data-dependent. 
• The Core Personal Consumption Expenditure (PCE) figures for April - the Fed's preferred inflation measure - and the final University of Michigan Consumer Sentiment figures are both scheduled for release on Friday. With the Fed reiterating its 'data-dependent' stance, these data points are crucial for understanding inflation and consumer sentiment. 

Mexican Peso technical analysis: USD/MXN finds support at 19.40

USD/MXN is trying to break decisively above prior technical resistance at 19.40, a level that has been limiting the pair's upside potential over recent days.

In anticipation of Wednesday's FOMC Minutes, the US Dollar strengthened against the Peso, allowing it to clear prior trendline resistance at 19.29 and the 10-day Simple Moving Average (SMA) near 19.34.

With these levels now coming into play as support, bulls are gearing up for a retest of the 20-day SMA at 19.45. A break of this level and of the April 23 low at 19.47 could open the door for 19.58, which aligns with the 78.60% Fibonacci retracement (Fib) level of the October-February move.

USD/MXN daily chart