Mexican Peso’s long-term outlook is constructive – Wells Fargo

The combination of monetary policy trends and contained election risks should result in long-term Mexican Peso (MXN) strength, analysts at Wells Fargo say.

Long-term Peso trends are still positive

In the upcoming election cycle, we believe a well-telegraphed outcome and policy continuity can protect the Peso from local politics-related depreciation. We also believe that hawkish leaning rate cuts can provide protection for the MXN, especially with Mexico's central bank likely to start easing ahead of the Fed.

Also, we remain steadfast in our view that the USD will broadly depreciate in the second half of 2024. USD weakness can also act as a tailwind for the Peso.

We expect the USD/MXN exchange rate to end 2024 at ~17.00. Further out, we believe Peso strength can continue and believe the USD/MXN exchange rate can trend toward 16.50 by the middle of 2025.