Mexican Peso selloff deepens as Fed hawks drive USD/MXN toward 17.50

The Mexican Peso (MXN) has continued to weaken against the US Dollar (USD) as speculation grows that the Federal Reserve (Fed) will raise interest rates again. The USD/MXN exchange rate has reached 17.50, its highest level in nearly two months, driven by the overall strength of the Greenback. The US Dollar Index (DXY) has surpassed 101.00 for the first time since late July, with business activity in the US expanding in September, outpacing expectations.

Fed officials have been expressing hawkish sentiments, suggesting nearly 93 basis points of tightening towards the end of 2027. Some Fed governors have indicated that additional rate hikes may be necessary to meet the 2% inflation target. In Mexico, traders are anticipating the Bank of Mexico's (Banxico) decision on interest rates later in the week, with money markets pricing in a 79% probability that Banxico will maintain the rate at 6.50%.

The US economic calendar will focus on Initial Jobless Claims and Fed speeches during this period. The weakening of the Mexican Peso suggests an opportunity for further gains, with the next resistance level being the 18.00 psychological barrier.