As we leave behind a year marked by intense international political and economic challenges, many are wondering whether the 2025 US election results will impact the value of the Mexican peso.. Last year’s lesson is clear: the USD to MXN exchange rate—shaped by various factors—often favors the dollar. However, tensions and uncertainty could still arise following recent statements by the new US president regarding US-Mexico economic relations.
In this article, we’ll review the latest events that have influenced the valuation of both currencies. Additionally, we’ll analyze the political, economic, and financial strategies of the new US administration to provide our Dollar to Mexican peso forecast for the year ahead.
Mexican peso vs. Dollar in 2024
In 2024, the Mexican peso underwent dramatic shifts against the US dollar. It started the year strong, supported by favorable conditions, but later weakened due to rapidly changing international dynamics and significant domestic pressures.
A mix of monetary policy changes, geopolitical events, and post-election turbulence were the year’s main challenges. These factors collectively defined a volatile 12 months for the Mexican peso vs dollar.
Early in the year, the Mexican peso’s value remained strong, largely due to Banxico (Mexico’s Central Bank) interest rates, which were more than 575 basis points higher than those in the US. This made the peso an attractive option for carry trade activity, a strategy where investors profit from the difference between interest rates of two currencies, which, in turn, boosted its strength.
By March, however, Banxico signaled a policy shift by cutting interest rates by 25 basis points to support economic growth. Despite the reduction, the relatively stable international outlook at the time helped prevent a sharp depreciation of the peso against the dollar.
This stability was short-lived. In April, tensions in the Middle East—specifically an attack on Israel attributed to Iran—caused a dramatic shift in global markets. As capital fled from riskier assets to safer ones—most of them based in the US—the USD to MXN exchange rate surged from 16.25 to 18.15 within a week, significantly weakening the peso.
This rapid depreciation revealed the extent of the vulnerability in Mexico’s financial system to international disruptions. These events had a direct and obvious impact on the exchange rate of Mexican currency to USD, underscoring the challenges ahead for maintaining stability in a volatile global landscape
The final stretch of the year: Political uncertainty and Trump’s victory
In June, the election of Claudia Sheinbaum as Mexico’s first female president raised some concerns in the markets. Her coalition introduced reforms, including changes to the judicial system, continuing a trend initiated by outgoing president López Obrador, which was marked by increasing executive influence over the judiciary.
After Sheinbaum’s inauguration, many of these measures advanced, further weakening the Mexican peso against the USD exchange rate. By September, the Mexican administration’s actions affecting judicial independence were poorly received by investors.
During this time, the US dollar to Mexican peso exchange rate reached its yearly high of 20.22 pesos to the dollar, as markets feared these policies would deter foreign investment.
While a perfect storm seemed to be brewing for a Mexican peso currency crisis, November’s election of Donald Trump introduced even more challenges. His administration’s protectionist rhetoric, including threats of tariffs, created additional pressure on the peso. As Trump’s policies began to take shape, concerns over US sanctions on Mexico and potential trade restrictions grew, pushing Mexican peso vs dollar forecasts toward greater volatility.
A Battle on All Fronts: The Future of the Mexican Currency to USD Exchange Rate
Based on all the factors outlined above, it’s possible to craft a realistic Dollar to Mexican peso forecast for 2025. Many of the challenges the Mexican peso faced last year persist, and in some cases, they are only beginning to take shape. External pressures, domestic reforms, and diverging monetary policies between Mexico and the US are likely to further test the peso’s resilience.
As previously mentioned, Donald Trump’s return to the US presidency has heightened uncertainty around US-Mexico economic relations. His administration has hinted at potential import tariffs on Mexican goods, tied to demands for increased border control efforts and stronger action against drug cartels in Mexico.. If these threats materialize, shifting from rhetoric to action, they could further strain US-Mexico trade tensions in 2025 and intensify exchange rate volatility.
Domestically, Mexico’s economic performance is expected to lag behind that of the US. Banxico’s private survey projects a modest GDP growth of 1.17% for Mexico in 2025, a slowdown compared to 2024. In contrast, the US economy is forecast to grow at 2.1%, driven by consumer spending and potential tax cuts introduced by the new administration.
This economic divergence is expected to further erode Mexico’s advantage as the carry trade period comes to an end. Banxico’s anticipated interest rate cuts—from 10.00% to 8.00%—will narrow the rate gap with the US, reducing the peso’s appeal for carry trade activity and putting additional upward pressure on the USD to MXN exchange rate.
The nearshoring trend—where US companies began relocating operations to Mexico—emerged during the pandemic and was fueled by the US-China trade war, bringing significant investment to Mexico’s manufacturing sector since 2021. However, its broader impact on the peso remains uncertain. Structural challenges such as infrastructure deficits and security concerns continue to limit the full benefits of this relocation of supply chains and other operations.
Unlocking the full potential of nearshoring, particularly in manufacturing, will require Mexico to attract more foreign direct investment while maintaining stable US-Mexico economic relations.
Adding to this dynamic is Mexico’s growing trade relationship with China, which contrasts with the US’s efforts to reduce dependence on Chinese imports. If US-China tensions escalate, Mexico may face pressure to align more closely with its northern neighbour to safeguard its competitive edge. A clear international strategy will be critical to carefully managing Mexico’s relationships with its key trading partners.
One of the main pillars supporting regional trade stability—the US-Mexico-Canada Agreement (USMCA)—is also under scrutiny as its first review approaches in 2026. This introduces uncertainty, as potential changes to rules of origin or tariff structures could threaten Mexico’s export advantages.
These concerns have fueled market fears of a potential Mexican peso currency crisis, particularly as the Trump administration appears poised to redesign aspects of the global trade framework.
Domestically, Mexico faces lingering tensions from the previous year, which continue to influence investor sentiment. While Banxico has made progress on slowing down inflation, preparing for larger rate cuts and implementing fiscal measures to stabilize the economy, concerns over the rule of law and judicial independence remain significant.
If left unaddressed, these issues could increase volatility in the Mexican currency to-USD exchange rate and deter much-needed investment.
Despite these challenges, certain industries provide crucial support to the peso. The automotive sector, a cornerstone of Mexico’s manufacturing exports, remains deeply integrated with the US and Canada, ensuring steady demand for the currency.
Similarly, Pemex, Mexico’s state-owned energy company, partially mitigates peso depreciation through its dollarized export revenues. However, its increasing focus on refining oil domestically is limiting its overall impact on the exchange rate.
A Year to Play It Safe – Bitso’s Take for 2025
Looking ahead to 2025, the Mexican peso-to-USD exchange rate faces significant challenges from both internal reforms and external pressures. Adding to the uncertainty is Donald Trump’s return to the US presidency, which casts doubt over US-Mexico economic relations.
The peso’s performance in 2025 will largely depend on Mexico’s ability to address its political and economic vulnerabilities while navigating an increasingly complex global trade landscape. For now, the US dollar remains a reliable and predictable safe haven for markets. In uncertain times like these, a cautious and vigilant approach is highly advisable.
The information provided is for reference only and does not constitute financial advice. Please note that past performance does not guarantee future results.
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