Skip to content USDMXN Analysis – 10-June-2024
USD/MXN—The Mexican Peso depreciated beyond 18 per USD in June, hitting its lowest point since October. This significant drop followed an exceptionally tough week, marking the most challenging period for the peso in nearly four years. The main trigger for this decline was the unexpected election results, causing traders to pull back from their positions quickly.
Market Worries Over Morena’s Plans
The concerns center around potential reforms by the ruling Morena party, led by President-elect Claudia Sheinbaum. There is apprehension that these reforms could weaken the checks on government power and lead to increased economic interference. This uncertainty has heightened market volatility, contributing to the peso’s depreciation.
Strong Dollar and Payroll Data Hit Peso
Furthermore, fears about possible changes impacting the Supreme Court and independent regulators add to the market’s nervousness. The US dollar’s strong rebound, fueled by positive US payroll data, also put additional pressure on the peso, compounding its decline.
Mexico’s Inflation Hits 4-Month High
Simultaneously, Mexico is grappling with rising inflation, which surged to a four-month high of 4.69% in May. This inflationary pressure forces Banxico, Mexico’s central bank, to maintain interest rates at a high level, creating a restrictive monetary environment. While this may limit the peso’s sharp decline, it also highlights the country’s complex economic challenges.
Understanding these dynamics is crucial for investors and policymakers as they navigate the economic landscape and make informed decisions.
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