Forecasts are adjusted once a day taking into account the price change of the previous day. In addition to this, as mentioned above, the volume of remittances from the US to Mexico has been growing. Therefore, these flows led to an increase in competition among money transfer companies including XE, Wise, Remitly, and PaySend.
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The volume of the USD and MXN pairs exchanged every day is substantial because of the close relationship between the two countries. For example, the US exported goods worth over $276 billion in 2021 and imported $384 billion worth of goods. As such, the two countries have a trade deficit of over $108.2 billion, which tends to favor Mexico. Meanwhile, the Fed and Banxico have maintained a hawkish tone for months.
One main reason for the downgrade in Mexico’s growth forecast is the looming trade war. The tariffs war will impact Mexico’s foreign earnings significantly. But fortunately Mexico-US made a last-minute deal last week to delay the recently-announced 25 percent tariffs. As such, we can predict that the trend will continue in the long term.
It managed to move below the support level at 19.41, the lowest level in May 2022. On the other hand, the Mexican economy is expected to do well, thanks to more foreign direct investments. thinkmarkets broker review The USD to MXN will likely continue falling in the next six months especially if America’s inflation continues falling.
The Bank of Mexico’s monetary policy
- As of Nov. 20, the Mexican peso has roared in value by 6.74% against the greenback over the year to date—one U.S. dollar can buy M$19.44 compared to M$21.00 a year ago.
- Consequently, the USD/MXN pair may experience sharp and unpredictable movements depending on the political environment during the elections.
- Key focus areas include monetary policy updates and sustained sentiment shifts from the trade deal developments.
- The Mexican Peso faces a confluence of challenges heading into 2025, ranging from domestic political shifts to international geopolitical dramas.
- The index, used to measure U.S. dollar strength or weakness compared to a basket of other mainstream currencies, reflects a 12.32% gain on the year to date.
A hyperlink or a reference to a broker should not be taken as an endorsement of that broker. You can either do it using your bank’s online account or use a multi-currency account such as the one provided by Wise, Airwallex, and Nium. Second, the Mexican economy is doing better than the US because of increased investments in the country. It seems like Mexico is benefiting from the rising tensions between the US and China. The pair is below the 50-day and 100-day moving averages, depicted through a descending trendline in blue.
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However, the Federal Reserve’s decision to hold interest rates, citing economic strength, yielded a contrasting sentiment of cautious neutrality regarding USD valuation. This highlights the broader market’s vigilance toward future monetary policy and its impact on currency trends. The combination of increased optimism and stabilized interest rates creates a favorable environment for further USD strength in the near term. Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation.
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- Since then, the interest rate was hiked 15 times, rising from 4% to 11.25% at the time of drafting this article on 15 November 2023.
- On the other hand, the Mexican economy is expected to do well, thanks to more foreign direct investments.
- Therefore, these flows led to an increase in competition among money transfer companies including XE, Wise, Remitly, and PaySend.
- The Mexican Peso is the most traded currency in Latin America and is important internationally.
The USD/MXN exchange rate is set by continuous trading in the global foreign exchange (Forex) market. Having strengthened by 6.74% on the year to date against the U.S. dollar, it’s unlikely 2022 will see further volatility created by central bank intervention. Both the BdeM and the Fed oanda review have increased interest rates seven times in 2022.
While this is good for the consumer, prior preparation will save you money. Make use of an online currency conversion calculator to make quick comparisons between vendors to secure the best rate without paying huge fees. Further price fluctuations will depend on the extent economic data releases for the U.S. and Mexico, scheduled or unscheduled, deviate from expectations. Early signs of falling inflation fueled speculation of a less hawkish Fed. This precipitated a “risk on” environment with U.S. dollar investors swapping safety for riskier asset classes. The index, used to measure U.S. dollar strength or weakness compared to a basket of other mainstream currencies, reflects a 12.32% gain on the year to date.
USD to MXN Exchange Rate Forecast for 2025 & 2026 – Live Daily, Monthly & Yearly Predictions
Meanwhile, the Relative Strength Index (RSI) remains subdued below 40, indicating that bearish momentum is still in place. This week, market attention is firmly fixed on the upcoming Fed interest rate decision, scheduled for Wednesday, May 7. Since the middle of 2024, the Mexican Peso has been weakening persistently.
Even though it remains above Banxico’s target, the central bank remains confident it will reach the 3% goal by the last quarter of 2025 or early 2026, as revealed in December’s meeting monetary policy statement. A hawkish Federal Reserve (Fed) was also a significant pull factor for investors seeking exposure to further rate hikes. However, the U.S. dollar’s weakness against the Mexican peso reflects the peso’s relative strength compared to many U.S. dollar-based pairs. The Mexican peso saw significant depreciation against the US dollar from 2014 to 2020.
The USD/MXN exchange rate shows how many pesos the market gives for one US dollar. Fluctuations in the pair’s exchange rate reflect the comparative state of current economic conditions in the US and Mexico. When the USD/MXN exchange rate rises, it indicates a strengthening US dollar against the peso.
This means that limefx the supply and demand of USDMXN are roughly matched these days. Traders are probably waiting for further developments, such as the US-Mexico tariff deal, to judge if the rate’s medium-term trend (Peso weak) can be resuscitated. On the daily chart, we also see that the USD to MXN price has been in a strong bearish trend.
This article will examine factors affecting the pair and methods used to analyse and forecast its exchange rate fluctuations. We will study the pair’s performance in 2023 and explore experts’ opinions on its outlook for 2024. The exchange rate of the Mexican peso is highly volatile due to several factors. Economic indicators such as GDP growth, inflation, and employment rates in Mexico significantly impact the MXN’s value. Monetary policy decisions by the Bank of Mexico (Banxico), including changes in interest rates, also influence the currency’s strength. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat.
Central banks FAQs
This is important because Mexico is a substantial oil exporter, with most of its oil exports to the United States. In the US, Federal Reserve Chairman Jerome Powell said in Jackson Hole that it was time to begin lowering interest rates as the risk of inflation was tilted to the downside. At that time, the US labor market seemed to weaken further, with risks of the unemployment rate skewed to the upside. Long-term forecasts inherently involve greater uncertainty and are intended as reference points for strategic planning, such as investments or international finance decisions. What was the price of gold (XAU/USD) and what are the forecasts for gold in 2024?
Investors rushed back into risk assets, betting that the worst might be behind us. If Congress approves tariffs – or through Presidential Executive Orders – these could exert upward inflation pressures and trigger another round of higher prices, preventing the Fed from easing policy. The Mexican Peso is already facing the challenges of a Donald Trump presidency even though he won’t take office until January 20. His victory keeps the financial markets on their toes as some of his policies tend to be protectionist and focused on domestic issues. Although Banxico’s decision was expected to weaken the Peso as it shrank the interest rate differential, it didn’t.
Therefore, further Mexican peso strength or U.S. dollar weakness expedited by monetary policy this year is unlikely. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. According to the Bank of Mexico’s report for Q2 2023, the regulator raised economic growth forecasts for this year and noted that the pace of expansion in 2024 is expected to be similar to that of 2023.
The U.S. dollar may have surged in value as a safe haven against its major rival currencies amid the economic and geopolitical headwinds that have dogged 2022. If an inflationary environment persists in Mexico or falls at a slower rate than in the U.S., a more hawkish Banco de México (BdeM) can be expected. It is likely this could further strengthen the Mexican peso against the U.S. dollar. It can be expected that future declines in the rate of inflation will correlate with U.S. dollar weakness as appetites for higher risk will prompt accelerated U.S. dollar outflows. While the Federal Open Market Committee (FOMC) is widely expected to hold the federal funds rate at 4.25%, the key focus for investors will be the messaging that accompanies the decision. Specifically, the tone of Fed Chair Jerome Powell’s post-meeting press conference will be critical in shaping expectations about the path of US interest rates in the second half of the year.