The exchange rate forecast for the CAD to MXN indicates a mixed outlook driven by recent economic developments in both Canada and Mexico. The Canadian dollar (CAD) has been buoyed by the strength of the U.S. dollar, rising in correlation with its performance. However, bearish sentiment surrounding the Canadian dollar has reached a five-month high, particularly after disappointing employment data from Canada indicated a contraction in job numbers and an increase in unemployment to 7.1%. These factors have raised the specter of potential interest rate cuts by the Bank of Canada, leading to speculative bearish positions against the CAD.
Despite the recent negative sentiment, analysts have expressed a more bullish outlook for the loonie, anticipating a recovery over the next few months as expectations grow around the Bank of Canada nearing the end of its easing cycle. A Reuters poll suggests that the CAD could strengthen to 1.36 against the U.S. dollar within three months, projecting a further rise to 1.3415 in a year as the market adjusts to changing interest rate policies.
On the Mexican peso (MXN) side, the currency has benefitted from higher interest rates set by the Bank of Mexico compared to those of the U.S. Federal Reserve, attracting investment. However, potential volatility has been introduced following the expiration of a tariff hike freeze with the U.S., leading analysts to forecast a moderate decline in the peso over the next year. Furthermore, concerns about Mexico's economic performance, which has shown signs of weakness, and political developments under the new administration could dampen investor confidence.
Recent price data shows that CAD to MXN is currently trading at 13.32, which is 2.1% below its three-month average of 13.6, indicating some stability within a narrow range of 5.1% between 13.30 and 13.98. Additionally, oil prices have slightly weighed on the CAD, with current oil prices at $67.44, 1.6% below the three-month average. Oil remains a crucial driver for the CAD, given Canada’s status as a major oil exporter. The volatility in oil prices, which has seen a range of approximately 20.4%, could further affect the Canadian dollar's performance against the peso.
In conclusion, while the immediate outlook presents some challenges for both currencies, the potential for recovery in the CAD and the impact of geopolitical and economic factors on the MXN suggest a complex environment for the CAD to MXN exchange rate in the short to medium term.
