GBP/MXN Outlook:
The GBP/MXN is likely to decrease as it trades significantly below its recent average and is near recent lows. Pressure from the Bank of England's interest rate cut bets is currently weighing on the pound.
Key drivers:
• Rate gap: The Bank of England is poised for potential rate cuts, contrasting with the Bank of Mexico's stable rate, creating a widening gap favoring the peso.
• Risk/commodities: A recent drop in oil prices, typically supportive of the Mexican peso, adds to its strength while the GBP faces challenges.
• One macro factor: Ongoing political uncertainties in the UK regarding leadership are contributing to GBP's decline, especially around upcoming elections.
Range:
The GBP/MXN is expected to drift within its recent range, staying close to the current lows rather than testing the upper extremes.
What could change it:
• An upside risk is a surprise decision from the BoE to maintain or raise interest rates, which could support the GBP.
• A downside risk is a further deterioration in UK economic data, heightening the potential for more aggressive rate cuts, which would pressure the pound further.
