Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone
March 06, 2025 –
“The recent performance of the Mexican peso has drawn investors’ attention, driven largely by the global depreciation of the U.S. dollar and expectations of potential adjustments in U.S. trade policies. The local currency gained ground following the release of mixed economic data in the U.S. market.
On one hand, private-sector job creation slowed to 77,000 jobs in February, well below the 140,000 expected, increasing interest in the upcoming Non-Farm Payrolls report and the potential direction of the Federal Reserve. However, a better-than-expected ISM services index indicates that economic activity is not as weak as feared, adding uncertainty to the Fed’s monetary stance, which in turn affects the peso’s strength.
On the trade front, comments from U.S. Commerce Secretary Howard Lutnick regarding a possible removal or easing of certain tariffs have helped pressure the dollar, opening the door for a Mexican peso appreciation. However, volatility persists due to tensions surrounding the USMCA and the possibility that some tariffs remain in place or that reciprocal measures are introduced in the coming weeks.
Domestically, signs of caution remain. Gross fixed capital formation contracted by 2.6% month-over-month and 4.1% year-over-year in December, reflecting a slowdown in productive investment. Construction spending plunged 9.5% annually, with a notable 17.1% contraction in non-residential projects. Although the manufacturing sector shows some resilience—with a 1.9% increase in machinery and equipment acquisition, driven by imported transportation purchases—concerns persist about the sustainability of growth.
Looking ahead, inflation trends and the performance of Mexico’s automotive sector will be key for the MXN. It is important to highlight that external uncertainty linked to the U.S. economy, along with the implementation of new trade policies, poses latent risks that could limit the peso’s recent appreciation. In this scenario, caution will remain essential regarding the Mexican peso.”
Analysis by Quasar Elizundia, Expert Research Strategist – Pepperstone