As we covered in our 2025 Year in Review, the major banks missed their Peso forecasts by almost 13%, and they were wrong in the opposite direction of what actually happened. If 2025 taught us anything, it’s that nobody can reliably predict where the Peso is going.
So why might 2026 be the most important year to hedge? Because the uncertainty isn’t going away. If anything, there are more wildcards on the horizon than we’ve seen in years.
The Wildcards Ahead
USMCA Review
The U.S.-Mexico-Canada trade agreement faces its first six-year review in 2026. This review will determine whether all three countries agree to extend the agreement or begin renegotiation discussions. Any uncertainty around the outcome could move currency markets quickly. Trade relationships are the foundation of cross-border investment confidence, and even rumors of renegotiation can trigger volatility.
Fed Leadership Transition
Federal Reserve Chair Jerome Powell’s term ends in May 2026. A change in Fed leadership often brings shifts in monetary policy direction, communication style, and market expectations. The Dollar’s strength or weakness is heavily influenced by Fed policy, and a new chair means new uncertainty about the path forward.
Tariff Situation
Trade tensions between the U.S. and Mexico remain a factor. Throughout 2025, tariff threats and negotiations created headlines and moved markets. This dynamic isn’t resolved. Any escalation could weaken the Peso. Any de-escalation or new agreements could strengthen it. The direction depends on political decisions that are impossible to forecast.
Banxico’s Rate Path
Mexico’s central bank has been cutting interest rates throughout 2025, bringing the benchmark rate down to 7.00%. Further cuts are expected in 2026. As Mexico’s interest rate advantage over the U.S. narrows, the carry trade dynamics that have supported the Peso will shift. How much and how fast remains to be seen.
The Unknown Unknowns
Beyond the factors we can identify, there are always the surprises. Elections in various countries, geopolitical events, economic data that defies expectations, natural disasters, policy announcements that come out of nowhere. History shows that the events with the biggest market impact are often the ones nobody saw coming.
The Bottom Line
Any of these factors could push the Peso stronger. Any of them could push it weaker. And the move can happen fast. We’ve seen swings of over 20% in a matter of months.
With this many wildcards on the table, 2026 is not the year to gamble on timing. It’s the year to lock in your rate, know your cost, and move on with your life.
Ready to understand your options?
Book a free Currency Risk Evaluation Call to discuss your specific situation and learn how MexEdge can help you lock in your exchange rate.
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