Puerto Vallarta, Mexico – The Mexican peso is expected to face significant volatility throughout 2025 as both external and internal uncertainties shape the economic landscape. Analysts predict that measures implemented by U.S. President Donald Trump and domestic judicial reforms will play a pivotal role in fluctuating exchange rates, according to leading financial experts.
The peso concluded 2024 at 20.8829 units per U.S. dollar, marking its weakest position since March 2022 and registering the most significant depreciation in 16 years. Market analysts foresee continued turbulence, with the exchange rate potentially reaching 23 pesos per dollar during the peak of uncertainty, particularly by mid-2025.
Periods of High Volatility Expected
Ernesto O’Farril, president of Bursamétrica, anticipates considerable episodes of market anxiety driven by external factors such as Trump’s aggressive policy stance and internal dynamics like the proposed judicial reforms and potential dissolution of autonomous regulatory bodies.
“We expect the peso to touch 23 units per dollar during the most uncertain periods, but stability towards the end of the year could see rates return to 18 pesos per dollar or lower,” O’Farril stated. He added that the looming threat of U.S. credit rating downgrades and policy shifts would exacerbate the peso’s volatility.
A net capital outflow of approximately $20 billion from government securities held by foreign investors is projected as a direct consequence of these economic shifts. O’Farril cautioned that Mexico might experience a one-notch downgrade from all major credit rating agencies, keeping its investment-grade status but precariously positioned.
Impact of U.S. Policies on the Peso
Erick Martinez, chief currency strategist at Barclays, pointed out that Trump’s anticipated mass deportation plans could trigger immediate downward pressure on the peso. “The markets will respond swiftly to announcements on immigration policy, and we anticipate the heaviest impact at the start of his term,” Martinez remarked.
Similarly, Victor Ceja, chief economist at Valmex Casa de Bolsa, highlighted the risk of new tariffs on Mexican exports to the U.S. as another destabilizing factor. “Tariffs directly impact the peso’s value, and the natural defense mechanism for Mexico will be exchange rate depreciation,” Ceja explained.
Interest Rates and Geopolitical Factors
Humberto Calzada Díaz, chief economist at Rankia LATAM, emphasized the influence of interest rates and geopolitical tensions on the exchange rate.
“Banxico’s interest rate, which ended 2024 at 10.00 percent, is forecast to drop to 8.50 percent by 2025. Although this remains restrictive, it may contribute to the peso’s depreciation. The Federal Reserve’s interest rate decisions will also be a significant factor, especially if global conflicts escalate or economic growth slows,” Calzada Díaz noted.
Projections and Market Consensus
Forecasts for the peso at the end of 2025 vary widely. According to Citi’s latest survey, market consensus estimates the dollar will trade at 21 pesos by year-end, with BNP Paribas offering the highest forecast at 22.30 units and Vector Casa de Bolsa predicting a low of 19.00 units.
James Salazar, deputy director of economic analysis at CIBanco, predicts short-term pressure on the peso could push the exchange rate above 21 units. However, he remains cautiously optimistic. “If the feared policies are not fully implemented, the peso’s depreciation may be less severe,” Salazar stated.
Salazar also cited mid-year events, such as the judicial reform process and the renegotiation of the United States-Mexico-Canada Agreement (USMCA or T-MEC), as key drivers of market nerves.
Economic Outlook
Interest rate differentials have supported the peso’s resilience, but declining rates in both Mexico and the U.S. could weaken its standing. Banxico’s 2024 rate of 11.25 percent is expected to decrease in the coming year, while the Federal Reserve is projected to lower rates by 50 basis points, maintaining a range between 4.25 and 4.50 percent.
As Mexico navigates these complex economic dynamics, policymakers and investors will closely monitor the evolving landscape, bracing for a year marked by fluctuations and uncertainty in the foreign exchange markets.
Puerto Vallarta, Mexico - The Mexican peso is expected to face significant volatility throughout 2025 as both external and internal uncertainties shape the economic landscape. Analysts predict that measures implemented by U.S. President Donald Trump and domestic judicial reforms will play a pivotal role in fluctuating exchange rates, according to leading financial experts.
