USD/MXN: Possible rebound sometime between 4Q2023 and 1Q2024 – Scotiabank

The Mexican Peso’s (MXN) bull run has extended to push the USD back to levels last seen in 2015. 

Banxico’s aggressive tightening policy is poised to reverse later this year

Despite the market’s concern about the Peso’s possible overvaluation, low volatility, momentum, large cash inflows and Banxico’s high for long stance will support the Mexican currency in the short term. 

Going forward, risk reversals seem to be positioning for a possible rebound in the USD sometime between 4Q2023 and 1Q2024, around the time when we could see Banxico’s first rate cut and the beginning of the Mexican and American presidential elections.

USD/MXN – Q3-23 17.30 Q4-23 17.90 Q1-24 17.90 Q2-24 18.30