CAD/MXN Outlook:
Bearish, as the CAD is below its recent average and near recent lows, pressured by escalating US-Canada tensions.
Key drivers:
• Rate gap: The Bank of Canada is cautious with its interest rate, while the Bank of Mexico has cut rates, creating a divergent impact on CAD and MXN.
• Risk/commodities: Recent fluctuations in oil prices may challenge the CAD, as it is a significant oil exporter; current oil prices are above their average but have been volatile.
• Trade relations: Ongoing U.S.-Canada trade tensions, including tariffs, are likely to weigh on the CAD's performance.
Range:
The CAD/MXN is expected to hold within the current range but may test lower levels given its downturn.
What could change it:
• Upside risk: A significant increase in oil prices could bolster the CAD.
• Downside risk: Continued escalation of trade tensions could further weaken the CAD against the MXN.