MXN/USD Outlook:
The MXN/USD exchange rate is slightly positive but likely to move sideways as it is currently above its 90-day average and trading near the higher end of its recent range, with no clear triggers pushing it decisively higher.
Key drivers:
• Rate gap: The Bank of Mexico holds its benchmark interest rate steady at 7%, while U.S. rates remain influenced by strong job data, leading to a mixed outlook for the peso and dollar.
• Risk/commodities: Recent volatility and upward trends in oil prices are generally positive for the peso, supporting it against the dollar amid a broader recovery in emerging markets.
• One macro factor: The extended timeline for Mexico's inflation to reach the target may keep a lid on peso gains, as it signals ongoing challenges for the economy.
Range:
Expect the MXN/USD rate to drift within its recent range, showing limited movement without a new catalyst.
What could change it:
• Upside risk: A stronger-than-expected U.S. GDP report could boost dollar demand.
• Downside risk: Further deterioration in inflation outlook for Mexico may weaken the peso against the dollar.
