For the Mexican Peso (MXN), slowdowns in remittances and vehicle exports portend to downside in the coming quarter, economists at CIBC Capital Markets say.

Changing tides

We expect a few of the factors benefiting the MXN (i.e. carry, remittances growth, and manufacturing exports) in 2023 to offer a headwind for the MXN going forward, in line with our Q1 USD/MXN forecast of 18.00.

We maintain our call for consecutive 25 bps rate cuts starting in March. Also, we anticipate an increase in the magnitude of Banxico’s rate cuts in late 2024, bringing the overnight rate to 9.25% (or 200 bps worth of cuts) by year-end. This compares to our revised forecast of four 25 bps rate cuts by the Fed.