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JPMorgan Predict Rangebound USDMXN Trade Between 17.00-17.50 For Rest Of Year

MXN
  • JPMorgan have noted that lingering tensions among USMCA countries in the past couple of years, particularly on energy and corn, suggested the risk of renewed uncertainties could derail the strong performance of the MXN that started in 4Q22. However, easing pressures on ongoing consultations amid a broader improvement in investment certainty in the economy after years of investment lull suggest the steady strengthening of the currency is justified and could stabilize around 17.00 before gradually weakening at the turn of the year.
  • Structurally, MXN is now on a better footing, with broad improvements in external accounts—most notably a comfortable financing of the current account, better growth prospects, and fading investment uncertainty. Still, headwinds include elections next year, prospects of a lower interest rates at the turn of the year and the risks of meaningful growth moderation in the US.
  • JPMorgan see the currency range bound between 17.0 and 17.50 for the rest of the year, but heading to 18.0 toward mid-2024 in the context of political volatility. As major central banks ease their tight policy grip markets should be able to understand the direction and sensitivity of the currency, but most developments suggest a new long-term equilibrium should be around 18.50.
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