A 25 bps rate cut in March now looks likely. However, Banxico has said it will be very cautious in its rate cutting cycle and the starting point for real rates in the 6%+ area suggests the Peso does not have to sell off as easing starts.

Fourth quarter growth slightly disappointed last year, but consensus 2024 GDP growth is still 2.2% – which should be supported by loose fiscal policy this year. Elections in Mexico are held in June.

Factoring US elections is a tough call into the Peso, but a variety of positive factors suggests MXN outperforms its forward curve.