Who will cut rates first, Banxico (Mexico's Central Bank) or the Federal Reserve (US Central Bank)? With a 5.75% spread (favoring Mexico) of short-term interest rates, the carry trade has money flowing into the Mexican Peso. As both countries prepare for upcoming elections, there is sure to be volatility in both currencies.
Both countries face high inflation and uncertain monetary policy direction as we advance. The key to the Peso's strength will be which Central Bank cuts rates first. In 2024, Mexico will host a presidential election in June, and the US will host theirs in November. The race in both countries is close and will be watched closely by the world.
