USD/MXN nears new lows under 17.000
The Mexican peso has seen a significant rally against the US dollar, plummeting from over 24 pesos per 1 USD to under a 17-to-1 exchange rate. This marks a potential entry into new territory for the USD/MXN pair, showcasing Mexico's strengthening economy relative to the United States. Such movements are critical for traders to monitor, as they reflect broader economic trends and policy impacts on currency values.
Mexican interest rates 5% higher than US rates
The Bank of Mexico's aggressive rate hikes from 4% in 2021 to 11% in 2023, compared to the US Federal Reserve's increase from 0% to 5.5% during the same period, have widened the interest rate differential between Mexico and the US. This significant rate difference plays a key role in influencing the USD/MXN exchange rate, making Mexican assets more attractive to yield-seeking investors and supporting the peso's strength.
Mexico profiting from US growth with 'nearshoring'
As US businesses shift manufacturing from China to Mexico to capitalize on closer geographic proximity and reduced logistics costs - a trend known as 'nearshoring', Mexico's economy benefits from increased manufacturing capacity and job creation. This movement is bolstered by US GDP growth, further supporting the peso's performance as the country leverages economic expansions north of its border.
Peso gains on strong US employment
Strong employment data in the US, partly fueled by Mexican migrant labor, has had a ripple effect on Mexico's economy, as it is the world's second-highest receiver of remittances. This means a percentage of earned US dollars are being sent back to relatives in Mexico, creating natural buyers of the Mexican peso. This trend plays a crucial role in bolstering the Mexican economy, reflecting the interconnectedness of the neighboring economies.
Where is USD/MXN going?
With historical fluctuations ranging from as low as 13.0000 to as high as 24.0000 in the past decade, the USD/MXN pair's future movements remain a point of speculation for traders. Market participants will closely watch for economic indicators, policy changes, and global trade dynamics that could influence the direction of this currency pair, keeping an eye on both short-term fluctuations and longer-term trends.
How to trade USD/MXN
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions on USD/MXN
Trading forex requires an account with a forex broker like IG. USD/MXN can be found in the 'Exotic' pairs tab. Many traders watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.
You can help develop your forex trading strategies using resources like IG’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.
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