USD/MXN: Peso to weaken moderately from Q4 – MUFG

FXStreet Insights Team FXStreet

The Mexican Peso continued its appreciation path in July. Economists at MUFG analyze MXN outlook.

Attention might gradually shift to presidential elections

In Q3 23, we expect the MXN to remain supported by high carry-trade return and the continuity of nearshoring investments. Assuming that the Fed signals no further rate hikes either at the Jackson Hole symposium in late August or at the September FOMC meeting, we expect the US Dollar to weaken further and keep USD/MXN at lower levels.

However, from Q4 23 onwards, we maintain our outlook for a moderate weakening of the MXN influenced by concerns over a global economic slowdown amid an environment of tight monetary policies worldwide.

A slowdown in the US especially might curtail USD inflows into Mexico. And on the local side, investors might gradually shift their attention to the presidential election scheduled to June 2024, which might bring some concerns on the next steps of economic policies.

Investors might adopt a cautious approach before the election and the MXN might weaken somewhat.

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FXStreet Insights Team

FXStreet

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