The Mexican Peso has been on the backfoot recently as Congress votes on a controversial judicial reform bill in Mexico. Morena’s supermajority is expected to pass the bill to the Senate, where they do not have the majority. This political turmoil has been weighing on the Mexican currency, with the USD/MXN trading at 19.79 and gaining some 0.05% at the time of writing.
The judicial reform bill has sparked concerns from foreign governments, workers of the Mexican court system, and multinational companies, who fear it could threaten democracy and allow criminal organizations to infiltrate the courts. Morena’s supermajority is expected to approve the bill at the Chamber of Deputies, but they remain slightly short of achieving the majority needed to modify the Constitution in the Senate.
President Andres Manuel Lopez Obrador has also proposed bills to abolish autonomous bodies, further adding to the uncertainty and economic weakness in the country. Fitch Ratings has commented that these reforms could negatively impact Mexico’s investment appetite, further straining the economy.
In July, Mexico’s Unemployment Rate rose to 2.9% as expected, higher than the 2.8% from June. This reflects the economic weakness in the country. The US ISM Manufacturing PMI also remained in contractionary territory, with the Employment sub-component improving compared to July’s data.
Many banks expect the Bank of Mexico to reduce rates by at least 50 basis points for the rest of 2024, putting further pressure on the Mexican currency. The USD/MXN is upwardly biased and consolidating near the 19.50-20.00 area, with the RSI indicating further upside potential.
Overall, the economic indicators suggest a slowdown in Mexico’s economy, with the political turmoil and proposed reforms adding to the uncertainty. Investors are closely watching the developments in Congress and the impact on the Mexican Peso. As the situation unfolds, it is essential to monitor the USD/MXN movement and economic data releases to assess the impact on the currency and the broader economy.
