USDMXN Analysis – 4-June-2024

The Mexican peso dropped to its lowest level since November 2023, nearing $17.5 (USD/MXN) in June. This decline follows the preliminary election results showing a supermajority win for the Moderna party and its allies in the Mexican Congress.

Peso Drops Amid Sheinbaum Victory

Claudia Sheinbaum, the Moderna party’s candidate, won the presidential election by a large margin, which was anticipated. However, the party’s control over upper and lower houses has caused market concerns.

Investors are worried about Sheinbaum’s potential to implement significant constitutional changes and controversial reforms. There is fear that she might continue the policies of the current President, Lopez Obrador, which have increased the party’s influence over the judicial system, strained public finances, and relaxed efforts against drug cartels. These concerns have negatively impacted investor sentiment, increasing selling pressure on the Mexican peso.

Mexico Economy Slows in Q1

Additionally, the Mexican economy’s underwhelming growth in the first quarter has led the Bank of Mexico to lower its annual output forecasts. This economic slowdown supports a more cautious or “dovish” approach from policymakers.

Summary

Understanding these factors is crucial for making informed decisions in the current economic climate. Monitoring political developments and financial indicators can help navigate the market’s volatility and anticipate future trends.

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