TD Sees Mexican Peso Strength Persisting Amid Risk Off

Key Moments

Carry and Valuation Underpin Bullish MXN View

TD Securities holds a positive outlook on the Mexican Peso (MXN), emphasizing what it describes as supportive carry and value metrics. The institution also highlights that positioning in the currency is relatively “clean,” reinforcing its constructive stance.

In the view of TD Securities, these factors collectively support the expectation that USD/MXN can move lower, even as broader markets exhibit caution.

USD/MXN Outlook and Forecast Path

Despite an environment characterized by global equity risk-off, TD Securities expects USD/MXN to trend back toward 18.00 into year-end. This anticipated move aligns with the firm’s broader forecast trajectory for the currency pair.

According to the firm, its projections keep USD/MXN trading in a range around 18.00-18.40 in 2027, followed by a gradual rise toward 19.00 by 2028.

Role of Carry, Value, and Equity Correlations

TD Securities underscores the supportive nature of both carry and valuation for MXN. The firm also notes a shift in the behavior of USD/MXN over the past year, pointing out that the pair has shown increased sensitivity to relative equity performance.

“Carry and value are more supportive for MXN. Given USDMXN’s increased correlation to relative equity performance over the past year and clean positioning, we continue to believe that USDMXN could retrace back to 18.00 into year-end, even amid a backdrop of global equity risk-off.”