Wells Fargo analysts forecast USD/MXN and USD/CAD trends amid tariff risks. Learn how trade policies may impact forex markets and currency movements.
The foreign exchange market faces new challenges as the U.S. considers imposing tariffs on Canada and Mexico. According to Wells Fargo, this could strengthen the U.S. dollar against both the Canadian dollar and the Mexican peso. The firm highlights that a 25% tariff could trigger major currency shifts, prompting responses from central banks in both countries.
Wells Fargo analysts suggest that if tariffs come into effect, the Canadian dollar could face significant depreciation. The Bank of Canada (BoC) might adopt a more dovish stance to mitigate economic pressure. Initially forecasting a terminal rate of 2.25%, the BoC may revise its policy to prevent a recession.
In response to these uncertainties, the USD/CAD exchange rate could rise. Analysts predict it may test CAD1.5000 by early 2026, with the risk of further depreciation depending on economic conditions.
The Mexican peso could experience even greater volatility. Despite potential interventions by the Central Bank of Mexico (Banxico), the currency remains vulnerable. Banxico might be forced to end its easing cycle earlier than expected to curb inflation and counteract depreciation.
However, several factors put the peso at risk. A widening fiscal deficit, political instability, and the overall strength of the U.S. dollar could drive further selloffs. Wells Fargo currently forecasts USD/MXN at MXN22.50 by the end of 2025, but escalating trade tensions may push the peso even lower.
As a safe-haven currency, the U.S. dollar typically appreciates during economic uncertainty. The possibility of tariffs on Canada and Mexico strengthens this trend. Analysts believe the dollar will gain not only against the CAD and MXN but also against a broader range of G10 and emerging market currencies.
Given these projections, traders should monitor central bank policies and trade negotiations closely. The evolving landscape may present both risks and opportunities in the forex market.
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Wells Fargo analysts forecast USD/MXN and USD/CAD trends amid tariff risks. Learn how trade policies may impact forex markets.
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