MXN likely to strengthen by end of 2016

The Banxico committee will meet on policy rates on 17th December, a day after U.S. Fed meeting. The Fed rate hike will increase the interest rate difference in favor of the U.S., and thereby, Mexico will face massive capital outflow. This in turn, will cause the MXN to depreciate. Moreover, oil prices, and uncertainty in EMs will keep the MXN more volatile. 

On the other hand, Mexico's strong connection with the U.S. economy and solid domestic market will support the growth outlook of the economy. This will attract the global investors and keep capital inflow continue.

"The USD/MXN is still one of our favourite bets in the longer run. We see strengthening beyond the near term, with the USD/MXN at 16.50 in 3M and to strengthen to 16.00 by end-2016", estimates Nordea Bank.