Following Dr. Claudia Sheinbaum’s triumph in Mexico’s presidential election and Morena’s majority in Congress, the Mexican Peso experienced a sharp decline against the US Dollar, causing concerns among investors regarding potential changes to the constitution and market stability. Sheinbaum vowed to uphold financial discipline and autonomy for the Bank of Mexico, but the market remains cautious.
In the wake of the announcement that Morena would have the majority in both houses of the legislature, the Mexican Peso began to plummet, with the USD/MXN trading at 17.70 and suffering losses of more than 4.20%. This development raised the possibility of structural changes, including potential reforms to the judicial system, which investors saw as a threat to the existing order.
Despite Sheinbaum’s promise to maintain the current policies of President AMLO’s government and avoid increases in fuel or electricity prices, concerns lingered among analysts. A Morena-led congress could be hesitant to approve necessary reforms to attract investment, potentially hindering economic growth and impacting the Peso adversely.
Looking ahead, the potential for Morena to gain a super-majority in the Mexican Congress raises fears of a concentration of power that could jeopardize institutional checks and balances. Analysts expressed apprehension that the party might pursue market unfriendly policies, such as constitutional reforms that could further weaken the Mexican Peso.
In light of ongoing developments and uncertainties surrounding the Morena-led government, the Mexican Peso remains under pressure from investor fears. Economic data from Mexico, including Business Confidence and Foreign Reserves, provide further insights into the country’s financial health and the potential impact on the Peso’s value in the coming months.
Technical analysis of the USD/MXN pair indicates that the Peso’s depreciation is likely to continue as political uncertainty persists. With the exchange rate surpassing key resistance levels and momentum favoring buyers, further gains for the USD/MXN pair are anticipated, potentially pushing it towards higher levels in the near future.
As the market awaits signals from the Federal Reserve regarding potential rate cuts and monetary policy decisions, the direction of the USD/MXN pair remains influenced by various factors, including economic data, political developments, and investor sentiment. Stay informed and monitor key indicators to navigate the ever-evolving landscape of the Mexican Peso against the US Dollar.
