The Impact of the US Presidential Election on the Mexican Peso
The Mexican Peso (MXN) is experiencing fluctuations as traders eagerly await the outcome of the US presidential election. The winner of this election is expected to have a significant impact on the Peso’s value in the days to come.
Factors Affecting the Peso’s Performance:
- If Kamala Harris wins, it is anticipated to be positive for the Mexican Peso.
- If Donald Trump emerges victorious, the impact is likely to be negative due to his threats of imposing tariffs on Mexican imports.
According to a highly-regarded election forecaster, 538.com, Kamala Harris currently holds a 50% probability of winning, while Donald Trump stands at 49%. This close race has caused fluctuations in the Peso’s value across its main pairs.
Mexican Peso: Four Possible US Presidential Election Scenarios
The Mexican Peso’s exchange rate with the US Dollar (USD) is projected to fluctuate between 18.30 and 22.26 depending on the outcome of the US presidential election.
In different scenarios:
- If Harris wins with a Democratic majority in Congress, the Peso is likely to strengthen.
- If Trump wins with a Republican majority in Congress, the Peso is likely to weaken.
- If Harris wins but lacks a majority in Congress, the USD/MXN pair is expected to fluctuate.
- If Trump wins without a Republican majority in Congress, the pair is likely to see a different range.
Mexican Peso Braces for Domestic Political Risks
The Mexican Peso could face significant risks from domestic political factors as the Supreme Court of Mexico deliberates on the constitutionality of a controversial legal reform. This reform seeks to change the way judges are appointed, a move that has sparked debates among supporters and critics.
Anticipating potential delays in the reform process, the Mexican parliament has passed laws to prevent judicial interference. This could lead to a constitutional crisis with implications for the economy and foreign investor confidence in Mexico’s legal system.
Technical Analysis: USD/MXN Trends
USD/MXN is currently trading below a gap it formed on Monday, indicating a bullish trend. The pair is also trading in a bullish rising channel, suggesting a potential continuation of the uptrend.
Analysis also suggests that gaps in trading patterns tend to close, indicating a mild bias for prices to rise and fill the gap in the near future.
Banxico FAQs
The Bank of Mexico, known as Banxico, plays a crucial role in maintaining the value of the Mexican Peso and setting monetary policy. Here are some key points about Banxico:
- Its main objective is to maintain low and stable inflation within target levels.
- Interest rate decisions by Banxico greatly influence the strength of the Mexican Peso.
- Banxico’s monetary policy is often influenced by decisions made by the US Federal Reserve.