Currency Report: From The Halls of Montezuma

The Mexican peso is the “blue-chip” emerging market currency. It’s long been a favorite for hedge fund carry trades—often paired with the yen—due to Mexico’s relatively high interest rates and liquid FX market.

Beyond its appeal to speculators, the peso has also served as a key risk-on currency—often leading and participating alongside a broad base of international equities and commodities.

Following the election of Claudia Sheinbaum in June of 2024, the Mexican Peso and Mexican stocks took a hit, turning into laggards on the international stage. 

It was clear for those paying attention that the market did not feel optimistic about President Sheinbaum’s economic leadership. 

But the tides are shifting. With a weakening dollar, the Mexican Peso is finding its footing, and Mexican equities are starting to improve in a constructive way.

Both are in the process of resolving higher from multi-month bases.

Here’s the Peso:

The peso recently found support at a key level of interest—coinciding with the 61.8% retracement of the 2020–2024 advance and aligning with the measured move target from the top that was completed in 2024.

Meanwhile, the MSCI Mexico ETF $EWW, an institutional favorite for expressing a bullish thesis on Mexico, has reclaimed two critical VWAPs. 

Firstly, we have the cycle-high VWAP from the spring of 2024. Secondly — and more importantly — the VWAP anchored to the election of Claudia Sheinbaum.

Emerging market equities don’t move higher without a supportive currency backdrop. That’s the rule, not the exception. And with both the peso finding its footing and $EWW reclaiming major VWAPs, we’ve got the foundation for a serious trend reversal.

This combination of strength in both equities and FX suggests Mexico is the next ex-U.S. group poised to lead as global capital continues to rotate internationally.

We want exposure here — and we’re expressing it in the simplest way possible: through bullish Mexico and bullish peso trades via Mexican stocks listed on U.S. exchanges.

Let’s take a look at some of our favorite setups.