Societe Generale strategists note Mexico still appears steady even as conditions become more challenging. Inflation has cooled to 3.94% in May, while Banxico has signalled an end to its easing cycle, leading markets to price potential hikes. They highlight record exports to the US and Mexico’s strong United States-Mexico-Canada Agreement (USMCA) position, but warn about uncertainty over future USMCA arrangements.

Mexico steady but USMCA clouds outlook

"Mexico still looks steady, even if the playing field is getting a bit more challenging."

"Inflation has cooled to 3.94% in May, back below the 4% mark, but Banxico has already signalled the end of its easing cycle, prompting markets to price renewed hikes."

"Trade is clearly doing the heavy lifting, with exports to the US hitting a record $50.7bn in April, underlining Mexico’s strong position within the USMCA framework."

"That said, the outlook is clouded by uncertainty around the future of the USMCA, with the US leaning toward periodic reviews rather than a clean renewal."

"USD/MXN was capped below 17.50 barrier while USD/BRL rally stalled at 5.20."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)