Mexican Peso Exchange Rate Forecast: Downward Revision and Outlook for the Future

2023-07-03 20:53:13

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By Julio Sanchez Onofre

Investing.com – After registering one of its best semesters in history in the first half of 2023, private sector financial analysts, consulted by the Bank of Mexico (Banxico), have revised downward their expectations for the exchange rate of the peso once morest the US dollar.

According to the Survey on the expectations of private sector economic specialists for June, published this Tuesday, the median of financial experts forecast that the exchange rate will average 17.42 pesos per dollar in July, some 73 cents below from the 18.15 pesos projected in May, although 20 cents above the June average of 17.22, according to data available on Investing.com.

“In this seventh month of the year, it is probable that the exchange rate of the Mexican peso once morest the dollar can break down to 17.00 spot. Whether it achieves it or even remains below that psychological level will depend on how far hawkish consider the market would behave the Fed as a result of the latest employment and inflation data to be released in the month. In any case, if there is pressure on the Mexican currency, it would be limited and temporary,” said Jorge Gordillo Arias, director of Economic and Stock Market Analysis at CIBanco.

In this way, at CIBanco they project that the expected price range for the peso during July would be 16.90 and 17.35 spot.

For the next few months, the analysts who participated in the Banxico Survey predicted that the price of the dollar will remain below 18.00 pesos in its monthly average at least until October, when it reaches 17.98 pesos.

For November, the median of the analysts projected that parity might register a monthly average of 18.16 units, closing the year at 18.33; Even so, some analysts considered that the dollar might even trade at 16.70 pesos at the end of 2023.

This contrasts with the results of the previous survey, from May, in which the median of the analysts saw the price of the dollar above 18.00 pesos as of July, with a closing of the year at 18.96.

With the update of expectations, financial analysts now see the moment when the dollar returns to trading at levels of 19.00 pesos.

According to the results of the Banxico Survey, the median of participating entities forecast that the exchange rate will return to a monthly average of 19.00 pesos per dollar in June 2024. This contrasts with the estimate that analysts had in May, when they expected the return of the dollar to 19.00 pesos in February 2024.

Thus, the median of analysts consulted by Banxico now expects the exchange rate to end 2024 at a level of 19.30 units, that is, 66 cents below what was forecast in May.

Will there be a return to 20.00 pesos per dollar?

After the revision of expectations, the median of analysts now rules out that the dollar will return to trading at 20.00 units, at least until the end of 2025.

The results of the survey carried out in June show that the consensus places the exchange rate at 19.80 pesos per dollar at the end of 2025, that is, 30 cents below the 20.10 expected in May.

When observing the basic statistics of the survey in detail, it can be seen that, by the end of 2025, some analysts even estimate the exchange rate at 18.00 units, although there are also those who place it at 22.00 units.

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