The CAD/MXN exchange rate exhibits a range-bound bias. Key drivers include the interest rate differential between Canada and Mexico, with both nations maintaining relatively stable rates. The Canadian dollar is influenced by lower oil prices, having recently traded 3.3% below its three-month average, which may limit its strength. Additionally, Canada’s recent strong job report and potential improvement in retail sales could contribute positively to the CAD's performance.
In the near term, the CAD/MXN is expected to trade within a narrow range, reflecting stable conditions in both economies. Upside risks to the CAD could arise from a rebound in oil prices, enhancing Canada's export revenues. Conversely, a decline in investor confidence due to slower economic activity in Mexico or divergence in monetary policies could exert downward pressure on the MXN, affecting the exchange rate negatively.