Dollar against Peso: What to expect from the USD/MXN forecast in 2025

The volatility of the USD/MXN pair has become a key player in the currency markets. In mid-October 2024, the quote reached 19.94 pesos per dollar, reflecting political tensions on both sides of the border. What does 2025 hold for this currency pair? The outlook is complex and risks abound.

Understanding the USD/MXN pair: The basics you need to know

The USD/MXN compares the strength of the US dollar against the Mexican peso, serving as a key indicator of the economic relationship between both nations. An increase in the pair indicates a stronger dollar; a decrease indicates the opposite.

With a 52-week trading range between 16.26 and 20.15 pesos per dollar, this pair’s volatility is notable. It trades 24 hours a day, Monday through Friday, with high liquidity, presenting typical spreads of 5 pips according to the broker.

The correlation of USD/MXN with other assets is direct with oil prices and precious metals, but inverse with pairs like EUR/USD and GBP/USD. This dynamic makes it a sensitive barometer of changes in the global and regional economy.

The current landscape: Why the dollar is gaining ground

Recently, the Mexican peso has lost significant ground. The factors behind this depreciation are multiple and concerning.

In the United States, the November 2024 presidential elections have generated uncertainty. Donald Trump, leading in polls, has threatened to impose 200% tariffs on imported vehicles from Mexico. This threat has pushed investors toward safer assets, strengthening demand for dollars and pressuring the peso downward.

In Mexico, the judicial reform pushed by President Claudia Sheinbaum has sparked institutional debates. A judge ordered the removal of her publication from the Official Gazette, but the government refused to comply. This confrontation has cast doubt on the stability of Mexican institutions, weakening investor confidence in peso-denominated assets.

The tangible consequences are clear. A more expensive dollar raises import costs for Mexico, creating inflationary pressures and complicating the situation for dollar-debted companies. For the US, the phenomenon is positive: it makes Mexican imports cheaper, benefiting sectors like automotive.

Factors shaping the USD/MXN forecast during 2025

Divergent economic growth

The International Monetary Fund forecasts Mexico will grow only 1.3% in 2025, while BBVA Research estimates 1.0%. These figures reflect weak domestic demand and a fragile labor market. In contrast, the US maintains more robust prospects with projected growth near 2.1%, driven by resilient consumption and a strong labor market.

This economic divergence reinforces a bullish scenario for the dollar against the peso.

Monetary policy: The decisive factor

Banxico has begun a cycle of interest rate cuts, starting from 10.50% in September 2024. It is expected to continue reducing throughout 2025, which typically weakens the peso by making peso-denominated assets less attractive.

The Federal Reserve has also started cuts, having reduced 50 basis points in September. Further moves are anticipated in the coming months, bringing rates to a range of 4.25% to 4.50%. Despite these cuts, dollar yields will remain globally competitive, supporting dollar strength.

Persistent inflation in Mexico

Mexican core inflation remained between 3.7% and 3.9% at the end of 2024, above Banxico’s 3% target. This gap suggests the central bank will face pressure to keep rates higher than desired, complicating the local economic outlook and continuously pressuring the peso.

Expert projections for the dollar-peso forecast in 2025

USD/MXN estimates vary considerably depending on the source:

For January 2025: projections range from 19.23 to 21.50 pesos per dollar. Longforecast is the most bullish at 21.50, while Tradersunion is the most conservative at 19.23.

For June 2025: the range broadens significantly, from 19.03 to 23.00 pesos per dollar. Here, divergence among experts is more pronounced, indicating high uncertainty about how geopolitical events will evolve.

For December 2025: estimates range from 18.77 to 25.83 pesos per dollar. CoinCodex projects the highest level, while Wallet Investor maintains the most conservative outlook.

This dispersion of forecasts reflects the complexity of predicting USD/MXN behavior in a volatile environment.

Technical analysis: Chart signals for 2025

Bollinger Bands and volatility

Bollinger Bands based on a 20-period moving average show moderate volatility. The price has recently touched the upper band, signaling bullish momentum. However, a retracement toward the mean suggests imminent consolidation.

If the pair breaks sustainably above the upper band, the bullish move could continue. A close below the moving average would indicate a bearish correction.

Relative Strength Index (RSI)

The RSI stands at 53.42, a neutral territory. There is no overbought or oversold condition, suggesting a sideways movement in the short term without a clear direction.

Investors should watch two critical thresholds: if RSI exceeds 70 (overbought), a correction is expected; if it falls below 30 (oversold), buying opportunities emerge.

Relative Volatility Index (RVI)

The RVI at 34.60 reflects a moderate bearish bias. This indicates that bullish momentum is weakening, which could lead to correction if the pair does not hold support levels.

Confluence of signals: What to do amid volatility

Fundamental and technical analysis converge in an uncertain scenario. Bullish risks dominate, stemming from US monetary policy and elections, but technical indicators suggest consolidation or correction in the short term.

For those seeking bullish opportunities: A sustained break above 20.00 with RSI not in overbought territory could indicate strong upward movement. Continued rate cuts by Banxico would reinforce this scenario.

For those considering reducing exposure: RSI above 70 signals a good time to take profits. A fall below 19.50 accompanied by a bearish RVI suggests closing long positions or entering short positions.

Historical context: Crises that shape USD/MXN

The historical relationship between both currencies has been turbulent. During the debt crisis of the 1980s, Mexico experienced severe devaluations that propelled USD/MXN higher.

The 1990s brought relative stability with NAFTA, attracting foreign investment. However, oil price drops in 2014-2015 impacted Mexico again, highlighting its dependence on oil revenues.

The 2008 global financial crisis, the US elections of 2016 and 2020, and the COVID-19 pandemic left visible scars on the pair’s behavior. This history suggests USD/MXN will remain volatile during periods of economic or political stress.

Structural forces shaping the exchange rate

Interest rates: A double-edged sword

When the Federal Reserve raises rates, the dollar strengthens due to higher demand for US assets. When Banxico raises rates, it temporarily attracts capital into peso assets. The cycle mismatch is crucial.

Bilateral trade

Mexico mainly exports to the US, which strengthens the peso when demand is robust. A trade deficit or falling exports weaken the currency. The US, as a global power, has greater flexibility in this regard.

Institutional stability

Political instability in Mexico generates immediate investor distrust. The strength of US institutions reinforces the dollar as a safe haven asset.

Energy: The Mexican variable

As a major oil exporter, Mexico suffers when oil prices fall. The US, as a net importer, is less vulnerable. OPEC production decisions disproportionately impact the Mexican economy.

Inflation: The ghost that won’t go away

High inflation in Mexico reduces peso attractiveness; moderate inflation in the US reinforces the dollar. Both countries battle this ghost in 2025.

How and when to trade USD/MXN

Available investment vehicles

Forex Market: Direct buying and selling of currency pairs through authorized trading platforms.

Specialized funds: Asset managers offer funds that replicate USD/MXN behavior, such as the S&P/BMV, allowing exposure without direct currency trading.

Derivatives: Futures and options contracts to speculate on movements without owning the underlying asset.

CFDs (CFD): Allow speculation on price movements without physically acquiring the currency, useful for leveraged investors.

Optimal trading moments

The Forex market operates 24/5, but liquidity and volatility vary. Key moments coincide with:

• Federal Reserve and Banxico interest rate announcements
• Employment and inflation reports from both countries
• Major political events in the US or Mexico
• OPEC statements on oil policy
• Relevant trade policy decisions

These events generate significant movements that can be exploited with rigorous risk management.

Final reflection: Opportunities and risks in 2025

USD/MXN faces 2025 as a particularly volatile pair. Events in the US, the Middle East conflict raising oil prices, and institutional uncertainty in Mexico create both risks and opportunities.

For short-term traders, these fluctuations are fertile ground. For long-term investors, prudence is essential. Leverage amplifies both gains and losses, demanding disciplined risk management.

Monetary policy decisions by both central banks will be decisive. While Banxico cuts rates and Mexico fights persistent inflation, the dollar is likely to remain strong in the short term.

In the longer term, improvements in Mexico’s political and economic stability could attract capital and strengthen the peso. Meanwhile, long dollar positions seem defensible if the geopolitical context remains tense. Volatility will remain the only certainty in the USD/MXN forecast for 2025.