I practice with a Peach main regularly.
The MU is highly in favor of Peach. Well, that's what I would say, if Squirtle didn't have armor. The secret to beating Peach is armor. Squirtle can armor through the majority of her aerials, smashes, and turnips. In fact WD can armor through multiple hits of her down smash (though you take mega damage).
If the Peach is not downsmash camping and doing a lot of floating, approach using amor moves (such as nair, or hydroplane smash) or attacks with invincible body parts (bair and up air). As long as she's not too far above you (no higher than the tip of a full hop), this is very easy. Even a WD is a good approach while she's floating. She'll see your WD and float canceling into an intercepting nair is second nature. If you do the WD hop, you'll get her until she adapts (where you can then start mixing up stuff). Bubble is not a good idea to approach a floating Peach, as there's basically no follow up, is difficult to land, and has mega lag. Once you get Peach onto the ground, get in on her and combo the class right out of her with weak attacks (jabs, tilts, grabs, water gun, bubble) and finish off with a smash attack or an aerial or two. You can follow up from there (at low %s) with an attack out of SS reverse jump. If you get a hit, take it as far as possible. Apply as much safe pressure as you can.
If the Peach is not floating or downsmash camping (because that totally happens), wavedash in and out of her range and try to poke her with a forward tilt or a jab and see where you can go from there. Never stop moving and be as slippery as possible.
Now, if the Peach is downsmash camping, bubble and water gun are your best friends. Armored smash attacks word well too, but don't have as many follow ups and give you damage. It is also possible to stay in her face when she's downsmash spamming, because Squirtle's jabs actually clank with Peach's downsmash and all of her jabs and tilts. It's stupid, but it works and you will win that clank war. Baiting out the downsmash and waiting it out for a punish works too.
Basically, you want to condition the Peach to float and try to play a defensive game of baiting and punishing (this is difficult since for her since you can armor through her turnips and have the speed to punish her for using them). Once you accomplish this she has no choice but to wait for you to mess up. And since Squirtle mains never mess up (right, guys?) it gives you a decent advantage. When all is said and done though, I'd say it's a pretty even MU that depends heavily on the stage. You want plenty of room to run around and platforms.
On edge guard Peach: you're on your own. I still haven't found an effective way. Bubble gets you wrecked. You just kind of have to SS jump out there and try to connect a move. She has a hard time edge guarding you as well if there are walls to cling to, since you can wait out her float.
Squirtle-Peach is not the funnest of MUs and hopefully you'll never have to deal with one in tournament, but it's winnable if you know Squirtle. Squirtle can run circles around Peach, so take advantage. Make her sit there and wonder what she's doing with her life. Squirtle-Peach also makes a freaking amazing doubles team.
Hope this helps.
