The Mexican currency is the third most depreciated currency, due to various factors that have led analysts to think that the Mexican peso could continue to lose strength.
The peso-dollar exchange rate shows significant movements today, with the Mexican currency being the third most depreciated currency, due to various factors that have led analysts to think that the Mexican peso could reach 20 units per greenback. Here we explain why.
According to Banco Base, the peso started the session trading around 18.36 pesos per dollar, showing a depreciation of 0.64 percent or 11 cents, with the exchange rate touching a minimum of 18.21 and a maximum of 18.58 pesos per dollar.
Why does the Mexican peso continue to weaken against the dollar?
For Banco Base, there are some factors that push the currency down, and they are the following three points:
First. There continues to be risk aversion towards Mexico, after yesterday afternoon the virtual president-elect, Claudia Sheinbaum, confirmed after her meeting with President Andrés López Obrador that she will carry out constitutional reforms.
As a result, the exchange rate showed upward pressures after announcing that the reform of the Judicial Power will be among the first to be discussed.
Also, Sheinbaum said there will be an “extraordinary election” for the Supreme Court, circuit courts, district courts, electoral tribunals, the council of the judiciary, and a new judicial discipline tribunal.
The election will take place on June 1, 2025. This is concerning because the Judicial Power is the last counterweight to the Executive Power.
Sheinbaum mentioned that she will name her cabinet next week and that she will soon discuss the plan for 2025 with the Secretary of Finance, Rogelio Ramírez de la O.
The market expected Sheinbaum to distance herself from President López Obrador, as there is a risk that her mandate will be seen as an extension of the current one.
Second. There continues to be global risk aversion, amid speculation that the President of France, Emmanuel Macron, could resign if his party performs poorly in the early elections to be held on June 30 and July 7.
Analysts from Banco Base recalled that Macron called for elections after his rivals obtained the largest proportion of votes in the European Parliament elections.
Third. The market remains on hold for the publication of the United States inflation data for May, which will be published early tomorrow, where Grupo Financiero Base estimates an annual rate of 3.47 percent.
In addition, tomorrow will also be the announcement of monetary policy by the Federal Reserve. Although it is expected that the Fed will keep the interest rate unchanged, between 5.25 and 5.50 percent, the projections of interest rate, inflation, and economic growth of the United States will be relevant.
AMLO downplays market nervousness
President Andrés Manuel López Obrador urged the next Congress, which has an officialist majority, to approve a controversial reform of the judicial power in September, downplaying the market’s nervousness at the prospect that this and other plans to modify the Constitution will advance in the country.
After the comment, the peso depreciated 1.5 percent against the dollar. Last week, it lost 8.2 percent, after the June 2 election opened the door to a supermajority in Congress for the ruling Morena party and its allies, with which they could make radical changes to the constitution.
“We need that reform, it’s urgent,” said the president at a press conference. “The constitutional reform could be in September…
Source: Milenio
