Bias: Bearish-to-range-bound: USD/MXN sits below the 90-day average and in the lower half of the 3-month range, leaving little room for a sustained break higher.
Key drivers:
- Rate gap: The Fed is expected to cut rates toward a neutral stance in 2026, while Banxico keeps the policy rate at 7.25%, narrowing the dollar's yield advantage.
- Risk/commodities: Oil price moves matter for MXN; firmer oil supports Mexico's economy and currency, while oil weakness tends to weigh on the peso.
- One macro factor: Trade policy changes impose tariffs on imports from China and other non-FTA countries, shifting costs and external demand for Mexico.
Range: USD/MXN likely to drift in the lower half of the recent range, with a slow move toward the middle if U.S. data points to easing or strength.
What could change it:
Upside risk: Stronger US payrolls data or a firmer Fed stance that keeps dollar demand firm.
Downside risk: Banxico signals easing or tariff relief reduces peso pressure.
