Skip to content USDMXN Analysis – 31-May-2024
The Mexican peso has strengthened past $17 (USD/MXN), recovering from the recent three-week high of 17.02 on May 29th. This improvement followed the release of strong labor data, which showed Mexico’s unemployment rate dropping to 2.6% in April from 2.8% a year earlier.
This data met market expectations and gave the Bank of Mexico (Banxico) more flexibility to keep interest rates high to fight inflation.
Mexico Elections Stir Peso and Inflation Concerns
Despite these positive developments, the peso’s rebound was tempered by political uncertainty ahead of Mexico’s elections this week. Claudia Sheinbaum from the Moderna Party leads the polls and is expected to continue President Obrador’s social policies.
These policies include higher minimum wages and increased government spending, which could lead to higher inflation and increased peso supply, putting pressure on the currency.
Market participants are now considering the possibility of Banxico cutting interest rates in June, following the interruption to the anticipated start of its rate-cutting cycle.
While the labor market data supports a robust economic outlook, the political landscape adds a layer of uncertainty. Investors are advised to stay informed about both economic indicators and political developments to make well-informed decisions.
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