The Mexican Peso (MXN) continues to weaken against major currencies, extending a three-day decline driven by investor concerns over President-elect Trump’s policy agenda. Worries around US-Mexico trade relations, migration policy, and domestic changes in Mexico’s judiciary have heightened market volatility for the Peso. Expectations that the Bank of Mexico (Banxico) will lower rates by 0.25% on Thursday also weigh on the currency as it erodes foreign capital inflows.

Key Drivers: Trade Tensions, Migration Policies, and Banxico’s Expected Rate Cut

1. Trade Uncertainty: Trump’s stance on renegotiating the US-Mexico-Canada Trade Agreement (USMCA) has raised fears of tariff adjustments, especially given recent Mexican constitutional reforms that could potentially violate the USMCA.
2. Migration Impact: Planned deportations could reduce remittances to Mexico, impacting Peso demand, while an influx of returning migrants could pressure Banxico to consider further rate cuts.
3. Banxico’s Rate Decision: Banxico’s potential rate cut to 10.25% would likely put further pressure on the Peso by reducing foreign investment.

Technical Analysis: Uptrend Continues in USD/MXN

USD/MXN has bounced off the lower channel trendline, signaling a potential uptrend continuation. A break above the November 6 high of 20.80 would strengthen this outlook, with a target of 21.00 as the next resistance level.