The current market bias for the CAD to MXN exchange rate is range-bound.
Key drivers include:
- The interest rate differential between Canada and Mexico remains stable, with the Bank of Canada maintaining a policy rate of 2.25% while Mexican rates face fewer cuts.
- Oil prices are a significant factor as Canada is a major oil exporter. Currently, oil is trading at $60.75, which is below its three-month average, suggesting fluctuations in CAD's strength.
- Economic growth indicators in Canada show strong job growth, which supports confidence in the CAD, while macroeconomic stability in Mexico suggests continued resilience in the peso.
In the near term, the expected trading range for CAD relative to MXN is likely to remain stable within recent levels.
An upside risk includes an unexpected rise in oil prices boosting the CAD, while a downside risk could be a slowdown in economic growth in either country affecting respective currencies.