Most of the factors driving the peso’s post-pandemic outperformance are still in place. Implied interest rate trajectories suggest that Banxico will cut more slowly and more incrementally than its Latin American counterparts, leaving the currency with one of the best volatility-adjusted carry profiles in the region.

Carry Return Index, 1999 = 100

Remittance volumes keep setting new records.

Remittances from workers outside Mexico, millions USD

And – although reshoring flows are likely overhyped – the country is well-placed for sustained economic gains as supply chains are re-routed through geographically-proximate and politically-compatible parts of the world. We think the peso could stage a short-lived rally if US data continues to exhibit “soft landing” characteristics.