What we learned about the Mexican peso in Miami

Genevieve Signoret & Delia Paredes

(Hay una versión en español de este artículo aquí.)

Recently, Genevieve was in Miami as a panelist and roundtable moderator on emerging market currencies at TradeTech FX USA 2024. While there, she was overwhelmed by the extent and intensity of bullish sentiment on Mexico and the Mexican peso.

As we had guessed, the Mexico nearshoring story struck her as the main one emerging market foreign exchange portfolio managers brought up when Genevieve pressed them to justify their optimism.

We worry they’re in for a reality check at some point. Genevieve detected blithe unconcern about the risks we see: rising violence, deteriorating rule of law, a dearth of reliable energy infrastructure, trade disputes, electoral uncertainty, a looming sharp fiscal adjustment. Also one tail risk: a constitutional crisis.

Said reality check could trigger a sudden sell-off. Until then, however, we expect external bullishness to continue to provide more support to the peso than we were anticipating just three months ago.