Rhythmic Reasoning_Full Report_Final_EN - Flipbook - Page 37
THE DRUMMER'S EAR | RHYTHMIC REASONING
Fig. 5: Core merchandise inflation has reignited in 2025
12%
9%
6%
3%
0%
-3%
2014
2016
Headline inflation
2018
Core merchandise
2020
2022
Core services
2024
Banxico real policy rate
In line with Mexico’s lacklustre outlook, we think the Mexican
peso (MXN) faces long-term challenges due to weak private sector
investment, limited fiscal space for countercyclical policies and
uncertainty around USMCA renegotiations. While USD weakness
has temporarily supported the MXN, strength may be short-lived,
all the while Banxico is expected to continue easing alongside
the Fed. Meanwhile, a decline in the carry-to-volatility Sharpe
ratio could reduce the attractiveness of peso denominated assets,
increasing downside risks for the currency. Consistent with the
decline in the peso’s volatility adjusted carry, it has fallen out of
the top tier of global FX performers. We forecast USDMXN at 19.26
by the end of 2025, with the peso weakening further to 20.06 at
end-2026.
Source: INEGI, Banxico, Scotia Wealth Management.
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