Mexican Peso drops as US growth, hot inflation rekindles Fed hike bets

The Mexican Peso experienced a decline of more than 1.20% against the US Dollar on Thursday, trading at 18.86 USD/MXN. This drop is primarily due to expectations of the Federal Reserve raising interest rates again in 2026, supported by US data. The Federal Reserve maintained its interest rates during Wednesday's meeting, with Federal Reserve Chair Kevin Warsh indicating seven policy decisions in 2027 and six in 2028.

US Core PCE inflation rose 3.1% in September, while the economy grew 3.4% YoY, surpassing estimates. Jobless claims fell below expectations, indicating a strong jobs report. The Bank of Mexico's Deputy Governor, Galia Borja, stated that a 6.50% interest rate is a "good monetary position" as inflation approaches its 3% target. Despite acknowledging the inflation trend, Borja emphasized that the job is not yet completed.

Mexico's economic calendar includes GDP for Q3 2026, expected to grow 0.7% QoQ on an annual basis. The USD/MXN pair is in an uncharted topside phase, with no clear resistance levels above the current market. Market analysts suggest that the Mexican Peso tends to strengthen during risk-on periods and weaken during market turbulence or economic uncertainty.