Home Business News The Mexican Peso continues to fall following elections

The Mexican Peso continues to fall following elections

5th Jun 24 8:34 am

The Mexican Peso remains under pressure, following yesterday’s session, which saw the Mexican currency plunge on the back of Claudia Sheinbaum’s resounding victory in the presidential election and the overwhelming success of her Morena party.

Market participants’ apprehensions are mounting over the prospective fiscal policies anticipated under Sheinbaum’s leadership, notably the contemplation of substantial spending programs alongside a promised minimum wage increase.

These proposals cast a shadow of doubt on Mexico’s future fiscal stability, thus exerting significant downward pressure on the currency.

The Morena party’s supermajority in Congress further compounds concerns, amplifying worries about unchecked power and fiscal policy, directly undermining the Peso’s stability.

On the other hand, the market expects Mexican consumer spending to rise due to the proposed wage increase. This could stimulate the country’s economic growth, benefiting the Peso. The high interest rates could also continue to support the currency. Still, the peso remains highly volatile and sensitive to political and policy uncertainties.

Its fluctuations reflect the market’s worries about the overall economic situation, including doubts about policies and constitutional reforms.

Looking ahead, the Mexican currency could be indirectly impacted by Wednesday’s release of the Services PMI of May in the US. The services sector in the US continues to experience contraction, although market consensus is beting on a slight uptick to 50.5 points, up from 49.4 points in April. Should the services sector show better performance than anticipated, it may support the dollar and consequently put more pressure on the Mexican Peso within the dollar-peso pair.

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