MXN weakens after Mexico's presidential elections

The Mexican peso is significantly weakening after Claudia Sheinbaum's victory in the presidential elections in Mexico. Sheinbaum was the candidate of the ruling party and will be the first woman to take power in the country. It is worth mentioning that her support exceeded 60%, which is also a result of the great popularity of the outgoing president, Andres Manuel Lopez Obrador. Despite Obrador's popularity, a president in Mexico can only serve one term. In addition to the presidential elections, the current ruling party 'Morena' will retain power and secure a decisive majority in both houses of Congress. It is also important to highlight that these were among the most violent elections, with over 200 people killed during the campaign, including 38 candidates.

A supermajority in the lower house and a simple majority in the upper house of Congress could allow for constitutional changes in Mexico, which might lead to populist reforms regarding pensions or minimum wage, potentially increasing the budgetary burden. Additionally, there could be changes in the judiciary, which also causes concern among global observers.

It is worth noting, however, that during Obrador's last term and the hawkish stance of the central bank, the peso was among the best-performing currencies in the world. Morgan Stanley indicates, however, that potential policy changes could lead to temporary weakness, and the USD/MXN pair could reach levels of 19-20, which would result in increases of even above 10% from current levels.

USDMXN gains almost 4% after Mexico's presidential elections. Source: xStation5