EUR/MXN Outlook:
The EUR/MXN exchange rate continues to trade below its 90-day average, and it is close to recent lows, indicating a bearish outlook. The euro faces multiple pressures, particularly due to geopolitical issues and rising energy costs.
Key drivers:
• Rate gap: The European Central Bank is maintaining a cautious approach amidst high inflation, contrasting with the Bank of Mexico's steady interest rate, which supports the peso.
• Risk/commodities: Oil prices are currently at 90-day highs, affecting the euro negatively as higher energy costs worsen trade balances and inflation risks in the Eurozone.
• One macro factor: The ongoing conflict in Ukraine continues to escalate, adding to geopolitical uncertainty and putting downward pressure on the euro.
Range:
Expect the EUR/MXN to drift within its recent 3-month range, with potential testing of recent lows.
What could change it:
• Upside risk: A de-escalation in geopolitical tensions could lead to a rebound in the euro.
• Downside risk: Further spikes in oil prices could deepen pressure on the euro, pushing it lower against the peso.
