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by USD/MXN—In June, the Mexican Peso traded at around 17.6 per USD, slightly above its seven-month low of 17.81 recorded on June 4th. This stability comes as markets evaluate the potential fiscal risks associated with Mexico’s new government. The peso dropped by over 5% following the election victory of the Morena party due to concerns about market-unfriendly policies.
USDMXN Analysis – 7-June-2024
Sheinbaum’s Election Triggers Peso Sell-off
Morena, alongside its allies, secured a supermajority in Congress, which heightened fears of increased state control over the economy. The election of President-elect Claudia Sheinbaum, by a significant margin, further intensified these concerns.
Investors are worried that Sheinbaum might follow in the footsteps of her predecessor, President Lopez Obrador, whose policies have strained public finances and weakened efforts to combat drug cartels. This uncertainty led to a sharp selling pressure on the peso.
Mexico Faces New Economic Challenges
Adding to the economic challenges, consumer confidence in Mexico has plummeted to a new seven-month low. Moreover, weak growth in the first quarter has prompted the Bank of Mexico to lower its output forecasts, reinforcing a dovish policy stance.
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