Outlook
The peso remains sensitive to domestic inflation dynamics and U.S. policy signals. Banxico’s February 6 hold at 7% keeps policy tight as inflation lingers above target, delaying any near-term easing. A softer U.S. dollar and firmer emerging-market sentiment supported MXN in mid-February, suggesting potential near-term upside if risk appetite holds. Ongoing USMCA-related trade discussions add headline risk to the currency and could influence flows depending on negotiation outcomes.
Key drivers
- Policy stance Banxico kept the policy rate at 7% in February, signaling a cautious approach to inflation.
- EM sentiment Emerging-market strength and a weaker U.S. dollar supported the peso in February, with upside potential if risk appetite remains positive.
- Inflation outlook Banxico extended its timeline for inflation to return to 3% until the second quarter of 2027, citing persistent core inflation and external challenges.
- Trade dynamics Ongoing USMCA negotiations and trade relations with the United States continue to influence MXN movements.
Range
MXN to USD at 0.058101 is 3.3% above its 3-month average of 0.056228, having traded in a relatively stable 8.0% range from 0.054040 to 0.058375. MXN to EUR is at 90-day highs near 0.049289, 2.8% above its 3-month average of 0.047936, having traded in a quite stable 5.1% range from 0.046900 to 0.049289. MXN to GBP is at 90-day highs near 0.043054, 3.0% above its 3-month average of 0.041785, having traded in a quite stable 5.0% range from 0.040994 to 0.043054. MXN to JPY is at 7-day highs near 8.9924, 2.4% above its 3-month average of 8.7747, having traded in a relatively stable 8.0% range from 8.4612 to 9.1351.
What could change it
- Policy path A shift in Banxico’s policy stance (e.g., earlier or later easing) depending on inflation progress and domestic data.
- Risk sentiment A sustained improvement or deterioration in global risk appetite influencing EM flows.
- Trade developments Any breakthrough or setback in USMCA-related negotiations affecting external demand for Mexican goods.
- Inflation trajectory A clearer path to the 3% target could alter expectations for policy normalization; persistent core inflation could keep policy restrictive longer.
- External factors Changes in U.S. macro data, energy prices, or commodity markets impacting Mexico’s growth and trade outlook.
