USD/MXN Forecast: Continues to Attempt to Find a Base – 27 February 2023

There is an interest rate differential between the 2 countries, and of course, Mexico has the edge. However, the reality is that safety will also be a major concern, and as a result, I think it’s likely that we will see the US dollar run towards, as we will have to prepare for a potential global slowdown.

The Mexican peso of course is a “risk on” type of currency, and as a result, it’s likely that we will continue to be looking at the peso to play potential Latin American growth, and of course, global growth in general as Mexico is a major exporter into the United States. However, if we are going to continue to see the Federal Reserve step on inflation by having a tight monetary policy, then it’s likely that the US dollar remains a little bit more interesting, and of course, you must worry about Mexican exports to the United States.

Keep in mind that in exotic currencies, the swings can be quite wild, and it tends to be more of a longer-term trade by default. I suspect that might be the case here, but if we can break above the 18.66 MXN level, then it’s very likely that the 18.00 level will hold as it has multiple times in the past. With that being the case, I think it is probably only a matter of time before things turn around, especially as we are starting to see the US dollar flex its muscles against other major currencies. While this is a bit of an interest rate play, the reality is that it’s a bit difficult to get overly excited about emerging market currencies now, despite the fact that there had been a big run-up in the value of the peso. Perhaps it’s time to start looking at the US dollar as a value investment here.