Bias: bearish-to-range-bound, CAD/MXN sits below the 90-day average and in the lower half of its three-month range, limiting upside unless oil strengthens.
Key drivers:
- Rate gap: Banxico’s stance remains firmer than the BoC’s, keeping MXN supported as CAD lingers on a looser policy path.
- Oil: Oil is firmer and more volatile; higher oil prices help CAD because Canada is a big oil exporter and energy-linked demand could lift the loonie.
- Macro: Mexico’s growth outlook is modest, supporting MXN stability against CAD pressure as policy stays cautious and investment remains steady.
Range: CAD/MXN is likely to drift within its recent range, with a test of the lower boundary if risk appetite weakens, oil momentum fades, or global trade dynamics shift.
What could change it:
Upside risk: A sustained oil rally and stronger global demand could push CAD/MXN toward the range’s upper end, supported by improved trade signals and broader risk appetite across assets.
Downside risk: A renewed escalation in U.S. protectionist measures against Canada would weigh on CAD.
