Bias: bearish-to-range-bound, as USD/MXN sits below its 90-day average and at the lower end of the three-month range.
Key drivers:
• Rate gap: The US Fed is expected to move toward a neutral stance with cuts in 2026, while Banxico keeps rates at a high level, narrowing the policy gap and maintaining USD support.
• Trade policy: Mexico's tariffs on imports from China and other non-FTA countries could affect inflation and trade, adding policy risk for MXN.
Range: Expect a drift within the recent three-month range, with a tendency to hold near the lower end.
What could change it:
• Upside risk: hawkish signals from US policy makers or stronger US data that sustain higher USD demand.
• Downside risk: softer US data or a dovish shift by the Fed that weakens USD and supports MXN.
