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Investing.com - Barclays expects the Mexican peso to strengthen against the U.S. dollar by year-end, setting a forecast of 17.25 for USD/MXN, as early progress on the USMCA trade agreement review supports the currency outlook.
The bank said the peso will continue to trade closely with risk sentiment and anticipates it will be among the first currencies to recover when the Middle East conflict shows signs of resolution. Higher oil prices present a broadly neutral impact on Mexico’s current account dynamics, according to the firm.
Barclays noted that Banco de México will likely need to moderate its dovish stance as energy prices feed into inflation, particularly as global central banks adopt more hawkish policies. The bank acknowledged that a prolonged energy shock could lead to fiscal deterioration if gasoline tax adjustments turn into subsidies, but does not expect this to weigh on the currency.
The USMCA review began in early March, ahead of the formal July 1 launch date. Barclays views the early start as constructive, saying earlier clarity could help revive investment and growth in Mexico.
The firm does not see headline risk around the trade negotiations as a relevant driver for the peso, noting that the market appears to have become immune to this type of uncertainty.
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