The market bias for the MXN to USD exchange rate appears bearish amid expectations of the Federal Reserve easing its policy, potentially leading to a weaker USD.
Key drivers include the interest rate differential, where anticipated cuts by the Federal Reserve could put downward pressure on the USD. Additionally, UBS's outlook suggests the MXN may strengthen as forecasts project improvements in the peso's value due to easing measures. Economic recovery in Mexico could also support the MXN, with forecasts indicating the peso might remain stable within a broad range over the next couple of months.
The expected near-term trading range indicates that the peso could hover around moderate fluctuations, maintaining its stability compared to the current levels. Upside risks include stronger economic recovery in Mexico or unexpected shifts in Federal Reserve policy that favor the USD. On the downside, weaker than expected remittances or diverging monetary policies between the United States and Mexico could lead to MXN depreciation.
