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Peso on the verge of collapse amid rising political fear

Explore how the Mexican peso is teetering on the brink of collapse as recent political shifts fuel economic uncertainty and how the upcoming US election could further impact the peso's stability.

a pile of mexican Pesos
Source: Shutterstock
Picture of Frank Kaberna
Frank Kaberna
Director of Strategy, Chicago

Key points

  • USD/MXN is up nearly 6% in recent weeks, trading near 19.000
  • Mexico's historical election caused the peso to slid in June, and now US politics are weighing on the pair
  • Tesla has paused plans for a new factory in Mexico until after the US election cycle, citing uncertainty around future import tariffs
  • USD/MXN traded as high as 25.000 in March 2020

USD/MXN now trading near 19.000

The USD/MXN currency pair has been on an impressive run, up nearly 6% in the past two weeks of trading. USD/MXN now flirts with the critical level of 19.000 amid political and economic shifts, influenced particularly by the outcomes of Mexican elections and current US electoral dynamics. 19.000 would be a significant price target for USD/MXN to surpass, as it has not sustained such levels since early 2023.

Mexican politics threaten currency

The win of a leftist supermajority in recent Mexican elections has ushered in concerns about less business-friendly economic policies for foreign investors like the US. This political shift drives uncertainty in the forex market, pressuring the Mexican peso as traders speculate on the potential economic repercussions of major policy changes.

Nearshoring benefitting Mexican economy

Nearshoring, or relocating business operations to nearby countries for cost efficiency, has bolstered the Mexican economy. This practice has become increasingly popular among US businesses looking to optimize operations while maintaining proximity to the US market. As a result, Mexico has become the leading importer to the US—surpassing China. The peso has benefitted from this trend, helping USD/MXN reach a 9-year low in the spring.

US tariffs could thwart Tesla factory in Mexico

Amidst US election uncertainties, Tesla's plans for establishing a factory in Mexico hang in the balance. Elon Musk has expressed hesitancy to proceed until the US electoral outcomes are clearer, highlighting the influence of geopolitical relations on cross-border investments.

Is Mexican peso about to crash?

With USD/MXN nearing 19.000 and potential political and policy changes on the horizon, concerns arise about the Mexican peso's stability. Historical movements and current geopolitical tensions could dramatically influence the peso's trajectory. Looking back at historical price action, USD/MXN spent nearly three years from 2020 to 2023 trading consistently above 19.000. The pair traded as high as 25.000 at the onset of the pandemic, providing historical precedent for further peso depreciation.

USD could be safe haven from high-yield currencies

Another variable in USD/MXN price action is the interest rate differential. As the Bank of Mexico begins lowering interest rates, reducing the yield advantage over the USD, the American dollar could emerge as a safer asset for investors. This shift might lead to decreased demand for pesos, further influencing USD/MXN pricing.

How to trade Mexican peso

  1. Open an account to get started, or practice on a demo account
  2. Choose your forex trading platform
  3. Open, monitor, and close positions on MXN pairs

Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.

Reviewed by:
Glen Frybarger
Senior Content Strategist, Chicago