Bias: Bearish-to-range-bound, EUR/MXN sits below its three-month average and in the lower half of the range.
Key drivers:
- Rate gap: The rate gap between Banxico and the ECB is widening in favor of the MXN as Banxico keeps policy tight while the ECB remains closer to neutral, which tends to push EUR/MXN lower over time.
- Oil and risk appetite: Oil trades at multi-week highs, supporting Mexico’s energy sector and overall risk appetite, which tends to strengthen MXN and push the pair down.
- Euro macro: Eurozone inflation is easing, supporting a neutral ECB stance and limiting near-term upside for EUR.
Range: Likely to drift within the established range, with a bias toward testing the lower end but staying inside the band.
What could change it:
Upside risk: A stronger Eurozone data print and the ECB signaling that rates may stay higher for longer could lift EUR and trim the downside bias.
Downside risk: A persistent oil rally and firmer Mexican policy or economy strengthening MXN could push EUR/MXN further down.
