Mexican peso starts the year with moderate recovery amid persistent challenges for 2025

The Mexican Peso shows signs of relative recovery against the US dollar after a volatile 2024 marked by downward pressures.

However, significant challenges persist both domestically and internationally that could limit its sustained appreciation.

In this context, it is crucial to analyze the factors influencing its performance and the short- and medium-term outlook.

After a complex year, the Mexican peso has experienced a 0.9% rebound in the first trading sessions of 2025, trading around 20.6 pesos per dollar. This recovery comes after a period of significant pressure during 2024, driven by key political and economic events.

The June elections, which saw the victory of the Morena party and Claudia Sheinbaum, generated some concern in financial markets, negatively impacting the currency. Additionally, the appointment of a figure with protectionist views and a history of trade disputes, similar to the one who held the US presidency until 2021, added another layer of volatility, further affecting the peso.

Despite this recent recovery, the Mexican peso remains under pressure. Domestically, the Manufacturing Purchasing Managers’ Index (PMI) fell to 49.8, indicating a contraction in sector activity. This figure is worsened by the decline in export orders for ten consecutive months, reflecting a drop in demand from key trade partners, particularly the United States.

Moderate reductions in production and employment within the manufacturing sector point to industrial stagnation, potentially negatively affecting investor confidence. The persistence of structural challenges and the lack of dynamism in the industrial sector pose a risk factor for the Mexican economy.

Internationally, the Federal Reserve’s monetary policy plays a crucial role. The possibility of a more aggressive stance by the US central bank, with potential interest rate hikes, could strengthen the dollar and consequently exert greater pressure on the Mexican peso. This external factor adds uncertainty to Mexico’s economic outlook.

Mexico’s upcoming economic data, set to be released next week, will be crucial for the peso’s trajectory. In particular, inflation figures and consumer confidence will offer valuable insights into the health of the economy and could significantly influence the currency’s performance.

The recent December manufacturing PMI report, with a value of 49.8 (slightly down from 49.9 in November), highlights persistent sector weaknesses, including the continued drop in new orders and relatively weak export demand. While moderation in cost pressures signals a positive sign, concerns in the automotive sector, rising insecurity, protectionist policies, and competition from China remain present.

In conclusion, while the Mexican peso has shown some resilience in the short term, internal and external factors, including the weakening manufacturing sector and the Fed’s potential stance, pose significant challenges. Upcoming economic data will be crucial in determining whether the peso’s recovery is sustainable or if it faces a new phase of turbulence. The focus of financial markets will be on these indicators to assess the future direction of the Mexican currency.