The Mexican Peso (MXN) is currently experiencing little change as traders eagerly anticipate the results of the US presidential election. The outcome of the election is expected to play a crucial role in determining the future direction of the Peso. If Democrat nominee Kamala Harris emerges victorious, it is likely to have a positive impact on the Peso. On the other hand, if Republican nominee Donald Trump wins, the Peso could face negative repercussions due to Trump’s threats of imposing tariffs on Mexican imports.
According to the highly-rated election forecaster 538.com, there is a 50% probability of Vice President Harris winning, with former President Donald Trump trailing close behind at 49%. In the last 24 hours, Harris has taken a slight lead after lagging behind Trump for some time, leading to a strengthening of the Peso across its main pairs on Monday. The fluctuation in the Peso exchange rate with the US Dollar is expected to range between a low of 18.30 and a high of 22.26, depending on the outcome of the election.
The Mexican Peso could face additional risks from domestic political factors in the near future as the Mexican Supreme Court is set to decide on the constitutionality of a controversial legal reform. The reform, which seeks to elect judges through popular vote rather than appointment, has sparked both support and criticism. While supporters believe it will eliminate corruption, critics argue that it could undermine judicial independence. President Claudia Sheinbaum awaits the court’s decision, emphasizing that the justices cannot be above the people.
The technical analysis of the USD/MXN pair indicates that the Peso is still likely in an overall uptrend on various time frames. The pair is trading in a bullish rising channel, favoring a continuation of the upward momentum. The gap down formed on Monday suggests a mild bias for prices to rise and close the gap in the coming sessions. The Bank of Mexico (Banxico), the country’s central bank, plays a crucial role in maintaining the stability and value of the Mexican Peso. Banxico’s main objective is to preserve low and stable inflation within target levels by setting interest rates accordingly.
Banxico meets eight times a year to make decisions on monetary policy, often in response to actions taken by the US Federal Reserve. The central bank’s decision-making committee typically convenes a week after the Fed to react or anticipate monetary policy measures. The rate differential between Banxico and the Fed is a key factor in determining the attractiveness of Mexican assets to investors. By closely monitoring the outcome of the US presidential election and the decisions made by Banxico, traders can gain insights into the future direction of the Mexican Peso.
