Market Data 
- The Mexican Peso weakens after the news that Claudia Sheinbaum has won the Mexican presidential election.
- Sheinbaum is likely to be more “disciplined” than her predecessor but continue his generous welfare programmes, say analysts.
- Her plans to raise the minimum wage are likely to drive growth and consumer spending but could increase inflation, economists say.
The Mexican Peso (MXN) declines by an average one and a half percent in its key pairs on Monday after the news that Claudia Sheinbaum has won the Mexican presidential election with a comfortable majority. Sheinbaum is expected to continue the legacy of her predecessor, mentor and fellow Morena party colleague, Andrés Manuel López Obrador.
USD/MXN is exchanging hands at 17.28 at the time of writing, EUR/MXN is trading at 18.74 and GBP/MXN at 21.97.
Mexican Peso weakness after Sheinbaum wins presidential election
The Mexican election was held on Sunday, and a quick count by the National Electoral Institute shows Sheinbaum leading with 58.3%-60.7% of the vote – an unassailable lead, according to Associated Press (AP) News.
Andrés Manuel López Obrador, the current incumbent, posted a video on X on Monday morning congratulating Sheinbaum on winning, saying today is “a day of glory” for all the people of Mexico, according to Aljazeera News. Sheinbaum will be the first female president to be elected in the country. Her main rival Xóchitl Gálvez also conceded defeat to Sheinbaum, who has already made a victory speech to crowds gathered in Mexico City’s central square the Zocalo.
“We women have landed in the presidency,” said Sheinbaum amid a roars of applause from supporters, adding “We are going to govern for everyone.”
Whilst on the campaign trail, Sheinbaum often repeated she will continue with most of Obrador’s social policies, including his generous welfare programme. She has also pledged to increase the minimum wage by circa 11%. According to economists, this is likely to boost consumer spending, a key driver of growth in recent quarters.
From a monetary perspective, however, it could make it difficult for the Banco de México (Banxico) to bring down inflation, says Kimberley Sperrfechter, Emerging Markets Economist at Capital Economics.
Greater discipline
Analysts say that Sheibaum may bring more order and discipline to the office than Obrador, because of her more quantitative and scientific background.
“She describes herself as someone who loves data, who makes decisions and implements policies based on data and that’s certainly in contrast to Lopez Obrador. She is someone who has an environmental science and engineering background. She has spoken about the need for Mexico to lead more in multilateral spaces on the climate emergency. She’s someone who, despite endorsing militarisation, did strengthen and take action on the civilian police in Mexico City as mayor here. So there’s reason to think that there could be some differences, but the jury is still out,” according to Stephanie Brewer, director for Mexico at the Washington Office of Latin America (WOLA).
Technical Analysis: USD/MXN breaks higher, extending uptrend
USD/MXN – or the number of Pesos that can be bought with one US Dollar – has broken out of a triangle price pattern that formed within a short-term uptrend and has surged higher.
USD/MXN 4-hour Chart
USD/MXN has now risen up and touched a major trendline (black) situated at around 17.25. Overall it is in a short-term uptrend and given “the trend is your friend”, the odds favor a continuation higher. A decisive break above the trendline would solidify the bullish case and indicate a bullish reversal in the medium-term time frame as well.
A decisive break would be one accompanied by a long green bar that closed near its high or three consecutive green bars in a row.
The Relative Strength Index (RSI) is overbought indicating the possibility of a pull-back evolving. It also indicates long-holders should not add to their positions. If the RSI exits overbought, returning to neutral, it will be a sign for short-term bulls to exit their longs. If a pull-back evolves, however, it is likely to only be a temporary correction before the overarching uptrend resumes and takes prices higher.
The long-term trend remains bearish, however, raising the risk of a reversal lower. However, there are no signs of this happening yet, so the uptrend is likely to continue.
Banxico FAQs
The Bank of Mexico, also known as Banxico, is the country’s central bank. Its mission is to preserve the value of Mexico’s currency, the Mexican Peso (MXN), and to set the monetary policy. To this end, its main objective is to maintain low and stable inflation within target levels – at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%.
The main tool of the Banxico to guide monetary policy is by setting interest rates. When inflation is above target, the bank will attempt to tame it by raising rates, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN. The rate differential with the USD, or how the Banxico is expected to set interest rates compared with the US Federal Reserve (Fed), is a key factor.
Banxico meets eight times a year, and its monetary policy is greatly influenced by decisions of the US Federal Reserve (Fed). Therefore, the central bank’s decision-making committee usually gathers a week after the Fed. In doing so, Banxico reacts and sometimes anticipates monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised rates, Banxico did it first in an attempt to diminish the chances of a substantial depreciation of the Mexican Peso (MXN) and to prevent capital outflows that could destabilize the country.
