Outlook
The MXN is likely to remain range-bound in the near term as domestic policy signals and global risk sentiment compete for direction. Banxico held the policy rate at 7% on February 6, signaling a cautious stance toward inflation. Inflation is expected to return to the 3% target by the second quarter of 2027, a factor that weighs on real yields and keeps policy uncertainty in play. After a mid-February dip, the peso found some support as broader EM risk appetite improved and the U.S. dollar softened (risk appetite means investor willingness to hold riskier assets; higher appetite supports EM currencies). Ongoing US-Mexico trade talks under USMCA add another layer of sensitivity to policy and growth prospects.
Current price action places MXN near 7-day lows versus USD at about 0.0579 USD per MXN, modestly above its 3-month average of 0.0563, and within a fairly wide 8% trading range (0.0540–0.0584). Similar cross-rates show mixed but constructive momentum in EMs, with comparable positioning versus EUR, GBP and JPY reflecting global risk dynamics and domestic policy expectations.
Key drivers
- Banxico policy decision and inflation outlook: Banxico kept the rate at 7% and extended the inflation return timeline to Q2 2027, sustaining a cautious domestic backdrop for MXN.
- Emerging-market sentiment: Improved risk appetite supports EM currencies, including MXN, when global dollar strength softens.
- Inflation trajectory and real yields: Persistent core inflation keeps real yields under pressure, shaping the peso’s resilience against a stronger dollar.
- USMCA/trade relations: Ongoing US-Mexico trade negotiations influence growth expectations and currency direction.
Range
MXN/USD: 0.057927 USD per MXN; 3-month average 0.056263; range 0.054040 to 0.058375.
MXN/EUR: 0.049226 EUR per MXN; 3-month average 0.047957; range 0.046900 to 0.049289.
MXN/GBP: 0.043060 GBP per MXN; 3-month average 0.041801; range 0.040994 to 0.043060.
MXN/JPY: 8.9878 JPY per MXN; 3-month average 8.7793; range 8.4612 to 9.1351.
What could change it
- Domestic inflation trajectory: A faster or slower return to target could shift Banxico’s stance and MXN direction.
- Global risk sentiment: A sustained risk-on or risk-off environment would push MXN with the broader EM complex.
- USMCA progress or setbacks: Clear progress or renewed tensions in US-Mexico trade could alter growth expectations and capital flows.
- Policy surprises abroad: Shifts in U.S. monetary policy or major geopolitical events can influence USD strength and MXN valuations.
