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by USD/MXN—In June, the Mexican peso tumbled to nearly 18 per USD, its lowest point since October 2023. This drop followed initial results indicating a significant victory for the Moderna party and its allies in the Mexican Congress, which could lead to increased state control over the economy.
Claudia Sheinbaum, the Moderna party candidate, won the presidential election by a large margin. While her win was anticipated, the supermajority in both congressional houses has sparked concerns in financial markets.
Investors Fear Sheinbaum Reforms
Investors are worried about Sheinbaum’s potential to implement constitutional changes and pursue controversial reforms. These concerns stem from fears that she might continue the policies of current President Lopez Obrador, which have increased the party’s influence over the judiciary, strained public finances, and weakened efforts against drug cartels.
Such policies have negatively impacted investor confidence, leading to a sharp sell-off of the Mexican peso.
Bank of Mexico Lowers Growth Expectations
Additionally, the Bank of Mexico’s recent decision to lower this year’s growth forecast due to disappointing first-quarter performance has contributed to a more cautious outlook among policymakers. This dovish stance indicates that interest rates may remain low, further putting pressure on the peso.
Summary
Understanding these developments is crucial for investors and those interested in the Mexican economy. The current political landscape and economic indicators suggest a period of uncertainty, making it essential to stay informed and consider the potential risks and opportunities ahead.
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