The Mexican Peso has continued to depreciate against the US Dollar, with the USD/MXN trading above the 20.00 figure. The Mexican Supreme Court is currently discussing a proposed judiciary reform amid increasing political tensions within the country. As the US presidential election remains close, investors are seeking safe-haven assets, leading to further depreciation of the Peso.
Supreme Court Judge Juan Luis González Alcántara Carranca has put forth a proposal to modify the controversial judiciary reform presented by the ruling party Morena. President Claudia Sheinbaum has refrained from discussing the court’s decision, focusing instead on maintaining a good relationship with the US regardless of the election outcome. Meanwhile, the US election continues to be a tight race between Democratic Vice President Kamala Harris and Republican former President Donald Trump.
The US economic docket has shown a widening trade deficit and a slight cooling of business activity. The Federal Reserve is expected to make a monetary policy decision soon, with expectations of a 25 bps rate cut. USD/MXN traders are eagerly awaiting the Fed’s decision and Fed Chair Jerome Powell’s press conference for insight into the future policy path.
Despite political turmoil in Mexico related to the judiciary reform, the USD/MXN remains unaffected. Analysts predict that Mexico’s inflation will moderate in October, with the Consumer Price Index projected to increase. Former President Trump’s harsh rhetoric continues to influence the Peso, with potential threats of tariffs impacting the currency. On the US side, economic indicators show a widening trade deficit and mixed business activity data.
Regarding technical analysis, the USD/MXN has reached a new yearly high before dropping below 20.20 as recent polls show Harris leading in Nevada. The pair’s uptrend remains intact, with a potential challenge at the 20.50 figure. However, if the USD/MXN drops further, support levels include the 20.00 figure, the October 24 daily low of 19.74, and the 50-day Simple Moving Average at 19.66.
Banxico, Mexico’s central bank, plays a crucial role in the country’s monetary policy. The bank’s main objective is to maintain low and stable inflation within target levels, utilizing interest rates as a primary tool. Banxico meets eight times a year and closely monitors the decisions of the US Federal Reserve to guide its own policy measures. The central bank aims to prevent substantial depreciation of the Mexican Peso and capital outflows that could destabilize the country.
