By Felipe Barragán, Expert Research Strategist at Pepperstone
October 4, 2025 –
“The peso spent Friday largely in “hold and assess” mode, orbiting the mid-18s per dollar as traders balanced a slightly firmer domestic investment pulse against softer global growth signals and a murkier U.S. policy backdrop. On the local side, INEGI’s July gross fixed investment surprised to the upside (+1.6% m/m), powered by machinery and equipment, even as construction lagged—an internal mix that keeps the nearshoring narrative alive but underscores uneven momentum across sectors.
External drivers did most of the talking. With Washington’s partial government shutdown suspending key federal releases—including the payrolls report—markets are flying on “alternative instruments,” which blunts directional conviction in the dollar and complicates the Fed’s reaction function. The data blackout itself is increasingly seen as economically costly the longer it persists, and it leaves traders leaning on private and timelier gauges. Today’s U.S. ISM services print didn’t help the growth mood: activity slipped to the breakeven line as new orders cooled and employment stayed soft—another nudge toward slower U.S. demand into Q4.
Commodities added a twist. Oil steadied intraday but is still on track for a sharp weekly drop, reflecting expectations of more OPEC+ supply and softer demand. For MXN, cheaper crude is a two-edged sword: it erodes Mexico’s terms of trade and Pemex cash flow, but it also eases headline inflation pressures and—at the margin—supports Banxico’s gradualism. Recent steps to smooth Pemex’s liabilities help reduce tail risk, even if the balance-sheet overhang remains heavy.
Policy is the medium-term anchor. Banxico’s late-September cut (to 7.50%) came with a cautious tone given sticky core inflation. That stance preserves Mexico’s still-healthy real carry versus peers, but the carry cushion is thinner than earlier in the year and more sensitive to U.S. rates and risk appetite—especially while the Fed’s path is clouded by the data freeze.
Near term, the base case is range-bound consolidation: domestic investment is not weak enough to scare capital, carry remains attractive relative to EM, and the global macro impulse argues for patience rather than bold positioning. Watch three catalysts: (1) Monday’s Mexico consumer-confidence update (after three monthly gains), (2) next week’s CPI for confirmation that disinflation remains intact, and (3) any resolution—or escalation—of the U.S. shutdown.
A firmer confidence print alongside benign inflation would let Banxico keep easing slowly without undercutting MXN’s appeal; by contrast, prolonged U.S. data darkness or a negative growth shock would sap risk appetite and make the peso more sensitive to global swings than to local fundamentals.”