On the first of February 2025, President Trump’s administration imposed 25% tariffs on Mexico and Canada. However, after two days, he agreed to a 30-day pause on the tariff after both nations took steps to address his concerns over border security and drug trafficking. If these tariffs go ahead, they could severely affect Mexico’s and Canada’s GDP, especially Mexico’s, since Mexican exports to the US make up 35% of its GDP. This could, in turn, affect the value of the Mexican peso in the foreign exchange market.
The USD/Peso Relationship
The Mexican peso could take a significant hit as President Donald Trump’s aggressive policies continue to rattle the economy of the US and its neighboring nations. In the latter half of 2024, we saw the Mexican currency rally significantly against the US dollar, reaching an all-time high liquidity. However, it would seem the bull run is over, as experts forecast something disturbing due to Trump’s new tariff.
For centuries, the United States and Mexico have been trade partners. In 2024 alone, the total goods traded between the two nations were worth an estimated $839 billion.
However, such high figures are typically recorded yearly, as the US remains Mexico’s largest trading partner. The high volume of trade between these two nations creates a strong and active economic relationship.
Peso vs. USD Price History
Although the peso is prone to wild fluctuations or volatility, its exchange rate with the dollar has been a wild ride throughout history. For instance, on July 30, 2008, the peso traded at 10 per US dollar. Fast-forward to March 2009, it fell to 15.4 pesos per USD.
The crash at the time was due to the 2008 financial crisis. Moreover, by 2020, during the pandemic, the Mexican peso lost more value, crashing to 25.13 per US dollar by March that same year.
The currency slowly began to gain on the dollar in the following years, up until 2023, when it reached 17.42 pesos per dollar. Since then, it has weakened again and trades at 20 pesos per dollar.
Mexican Peso Price Forecast 2025
The year may have just begun, but financial experts already have a good idea of whether the MXN will prevail. The peso’s value is primarily determined by its central bank’s policies, foreign investments, and remittances from Mexicans living in the US.
However, the US is another dominant force affecting the MXN’s price. In recent months, President Donald Trump has enacted stricter border policies and has also initiated his massive deportation plan. Both of these are targeted at Mexican immigrants and are already causing friction in US-Mexico relations.
These and many more are why US analysts like Alejo Czerwonko predict that the Mexican peso exchange rate may not improve in 2025. Mexico’s central bank also expects a similar fate for its currency, which currently stands at 20.53 pesos per dollar.
There are also economic struggles for Mexico as a nation. Mexico’s GDP shrank by 0.6% in Q4, the most significant drop since 2021. Policymakers emphasized the need for flexibility, especially with US trade uncertainty and possible tariffs posing risks. However, substantial remittances and Mexico’s appeal for carry trades helped support the peso, while a weaker US dollar also played a role.
Banxico’s latest minutes indicate a possible 50bps rate cut in March if inflation allows, prioritizing economic growth concerns. Meanwhile, Trump’s tariff threats add uncertainty, potentially disrupting trade and pressuring the peso. According to Trading Economics, the Mexican peso is expected to reach 20.97 by the end of this quarter and 21.86 in 12 months.
Opportunities for Traders
Market volatility presents both risks and opportunities for traders looking to take advantage of the MXN. The Mexican peso is closely tied to natural resources, particularly oil, which means energy market fluctuations can create profitable trading conditions. The weekly US oil inventory report is released every Wednesday at 10:30 a.m. ET, and often triggers strong movements in USD/MXN, making it a key event for forex traders to watch.
Mexico’s central bank is expected to adjust interest rates and Trump’s tariff policies, adding uncertainty. Traders using MT4 trading platforms can capitalize on price swings by timing their entries around major economic releases. The peso also tends to move in sync with other commodity-based currencies like the Brazilian real (BRL) and the Colombian peso (COP), meaning global energy trends can indirectly impact its value.
Successful trading in this environment requires a two-sided approach: tracking US and Mexican economic data. Banco de México meets eight times yearly to discuss monetary policy, often just days after the US Federal Reserve’s decisions. These meetings can create sudden shifts in the peso’s value, making them crucial moments for traders to position themselves strategically.
The Road Ahead for the Mexican Peso
So far, the peso price forecast for 2025 is bearish (a downtrend). The currency faces significant pressure with Trump’s tariff policies and Mexico’s slowing GDP. The relationship between the US and Mexico will continue to be a substantial factor in the peso’s trajectory. Traders must stay sharp and track economic data to find profitable opportunities in the forex market.
