EUR/MXN Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and lacks a strong driver.
Key drivers:
• Rate gap: The European Central Bank's neutral stance contrasts with the Bank of Mexico's current interest rate, which is higher, putting pressure on the euro against the peso.
• Risk/commodities: As oil prices remain above average, this scenario generally supports the peso due to Mexico's status as an oil exporter, which helps its trade balance.
• One macro factor: Mexico's recent tariff increases on imports from China may create domestic economic pressures, influencing the peso's competitiveness.
Range: The EUR/MXN is likely to hold within a stable range with potential minor fluctuations, given its current position below the three-month average.
What could change it:
• Upside risk: A sudden increase in commodity prices could strengthen the euro's appeal, boosting its value against the peso.
• Downside risk: Any geopolitical instability or further tariffs could negatively impact the euro, leading to additional softness in the exchange rate.
