Search
Close this search box.

Explore the world.

Assess underlying market conditions and fundamentals in the world's major economies.

World

Stay ahead.

Follow the biggest stories in markets and economics in real time.

Subscribe

Get insight into the latest trends and developments in global currency markets with breaking news updates and research reports delivered right to your inbox.

After signing up, you will receive regular newsletters from Corpay, and may unsubscribe at any time. View Corpay’s Privacy Policy

Exogenous forces could collapse the carry trade.

Political uncertainty is growing ahead of the 2024 election, and the ruling Morena party may be tempted to deploy the public balance sheet in drumming up support – but the fiscal outlook should nonetheless remain far stronger than many of Mexico’s emerging market peers.


Instead, we think the biggest threats to the peso’s current valuation could come from abroad. Renewed currency intervention – or a more hawkish reset in Japan’s monetary policy stance – could trigger a surge in the yen and squeeze traders with leveraged positions – forcing a selloff in the peso. Under another scenario, a pronounced downturn in the US economy could derail three of the most powerful exchange rate determinants at once: slower wage growth would limit remittance flows, a drop in expected export volumes could curtail “nearshoring” investment volumes, and a flight to safety might force a violent unwind in dollar-funded carry trades. Finally, the currency’s correlation with US equities represents a vulnerability – if current levels of ebullience in US markets fade and volatility rises, the peso will fall.


30-day correlation, VIX and MXNUSD

Euro Crisis Flashbacks Hit Markets
European political nerves
Market Calm Returns
US inflation vs the Fed
Fed Signals One Cut in 2024, Down From Three
US Inflation Decelerates Sharply, Bolstering Rate Cut Odds

Latest Analysis

Latest Analysis