Bias: bearish-to-range-bound, as USD is below the 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Federal Reserve is likely to ease its monetary policy next year while the Bank of Mexico has signaled it may maintain rates, favoring a weaker peso.
- Risk/commodities: Recent declines in oil prices could pressure the Mexican Peso, as oil revenue is crucial for Mexico’s economy.
- Economic growth forecasts: A survey predicts Mexico’s GDP growth will slow, which might contribute to a weaker peso by year-end.
Range: USD/MXN is expected to hold steady in this low range, with limited movement as it tests recent lows.
What could change it:
- Upside risk: A stronger-than-expected US labor market report could boost USD demand.
- Downside risk: Further geopolitical tensions or economic downturns in Mexico might lead to additional peso weakness.
