USD/MXN: Mexican Peso resilience might not last long due to domestic and external risks – MUFG
02.12.2022, 16:33

USD/MXN: Mexican Peso resilience might not last long due to domestic and external risks – MUFG

The Mexican Peso has been rising versus the US Dollar over the last weeks. Analysts at MUFG Bank, argue the resilience of the Mexican Peso might not last long amid domestic and external risks. Their forecast is for USD/MXN to reach 19.80 by the end of the first quarter 2023 and 20.00 by the third quarter. 

Key Quotes:

“The Mexican peso continued its strengthening path in November helped by improving risk sentiment and a weaker US dollar supported by expectations for a slower pace of Fed hikes.”

“Further Fed hikes albeit slower along with the resilient core inflation in Mexico leads to the expectation of further interest rate hikes in Mexico. We expect a further 50bps hike in December meeting to 10.50%, followed by a final rate hike to 11.00% early next year. Although such scenario might be favourable for MXN appreciation, we see a set of risk factors that might revert the MXN appreciation observed in the latest months.”

“The scenario of some recession in the United States affects Mexican growth path.”

“We keep our bearish forecast profile for MXN due to building fears of a sharp global economic slowdown, and domestic risks coming from potential radical AMLO policies leading to some increased fiscal imbalances. Such risks are higher in a circumstance of weaker economic growth ahead that could impact Lopez Obrador’s popularity that is currently at quite high levels (61% approval rating).”

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