Cartel chaos rocks Mexico: USD/MXN outlook as retaliatory violence spikes

USD/MXN is a fairly uncommon FX pair in retail trading but amid recent developments in Mexico, it could provide opportunities ahead.

Mexico has seen a flare-up in violence around the country following the killing of the Jalisco New Generation Cartel (CJNG) leader Nemesio “El Mencho” Oseguera Cervantes by Mexican Special Forces, supported by US intelligence, amid the Trump Administration’s efforts against Drug Trafficking.

Retaliation from the Cartel has led to significant unrest, with narcotraficantes establishing blockades on major highways, torching buses, stores, and infrastructure near Guadalajara and Puerto Vallarta since February 22.

Following the instability, questions have been raised about the ability of Mexican forces to maintain security as the 2026 FIFA World Cup approaches (Mexico will host some games). President Claudia Sheinbaum has repeated that risks to infrastructure and tourists remain low; however, the situation requires close tracking.

In FX Markets, USD/MXN has corrected in a major downtrend since the beginning of 2025 and is now eyeing a potential reversal as instability in the country could lead to outflows in the currency.

Some monetary policy backdrop for Mexico: the Banco de México (Banxico) recently communicated a hawkish pause (current rate at 7.00% from 11.25% highs in 2023) amid elevated inflation from recent data. Such communication would usually support a currency; however, political instability could outstrip the turn from the Central Bank.

Let’s dive right into a top-down look at USD/MXN to spot if an imminent reversal could emerge with the current turmoil.

Note: While international turmoil is troubling, traders are concerned about one thing in particular. Money. It makes the World go around, and while some profit from the situation, the wisest thing that anyone can do is at least to remain conscious of what is happening.

Do your own research, study news from all possible sides and biases, and make sure to keep a wise, objective approach when trading on such touchy subjects. Praying for peace and stability in Mexico and around the World.