Mexican Peso to Record Strong Performance against USD in 2023: Barclays

According to Barclays analysts, the Mexican peso (MXN) might end 2023 at 19.00 vs the US dollar (USD) because of nearshoring advantages, properly funded public finances, and suitable moves by the nation’s central bank. If this forecast is realized, the peso-dollar exchange rate would decline by 4.15% from its present levels.

Highlighting factors that could work in favor of the peso, Gabriel Casillas, chief economist for Latin America at Barclays, noted at a news conference:

“Fiscal austerity, Mexico’s attractiveness for nearshoring and a shrinking investment universe, as Russia is no longer an option and Chinese politics are posing worries, are factors making Mexico look like candy.”

Barclays Portray Hopeful Prognosis for Mexican Peso

Following a prognosis by a Moody’s analyst that the emerging-market currency would depreciate by 20% through the end of 2022, 2023, and maybe into 2024, Barclay’s forecast paints a more hopeful picture.

When asked about the Moody’s forecast of an impending correction, Erick Martinez, a Barclays analyst, underlined his “clear disagreement” with it.

Martinez stated that if economic problems worsen at the start of 2023, the Mexican currency may encounter periods of volatility, but it would return to attractive levels as central banks around the world loosen their monetary policies.

He argued that “the dollar is overvalued precisely because the U.S. Federal Reserve’s monetary policy is very restrictive,” adding:

“As it relaxes, the dollar will return to its fair value. I don’t see the dollar becoming stronger in [the] context of [the] crisis in the United States.”

Following a potential worldwide economic slowdown during the first two quarters of 2023, Barclays also predicted Mexico’s economic growth for that year would be 0.9%, down from the 2.5% anticipated for 2022.

The company predicted Mexico will expand by zero percent in the first quarter of 2023 and by a negative one percent in the second.