Mexican Peso retreats as USD/MXN bounces from near YTD low

The Mexican Peso (MXN) fell against the US Dollar (USD) as the USD/MXN pair climbed over 0.09%, reflecting a market mood shift and the strength of the Greenback. This occurred before the September 16 Federal Open Market Committee (FOMC) monetary policy decision. A recent US inflation report, which included an increase in the producer price index (PPI) to 5.4%, indicated a possible Fed rate hike on September 16.

Additionally, strong August Nonfarm Payrolls data and a Fed Chair's statement on inflation and labor market conditions further supported this outlook. Other factors contributing to this move include rising energy prices due to Middle East tensions and the Mexican peso's status as a key exporter of oil. The Bank of Mexico (Banxico) has maintained its interest rates at 6.50% since May 2026, indicating a near completion of its easing cycle.

Despite confirming inflation risks are tilted upward, the latest 12-month inflation print was slightly below estimates. Mexico's economic data, including retail sales on September 22 and early September inflation readings, will influence the MXN. The pair currently trades at 17.1498, below its key moving averages and near a key support level at 16.89.