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USDMXN Extends Rally to 18.00, Commerz Expect Sheinbaum To Calm Markets

MEXICO
  • The Mexican peso has come under significant pressure again on Tuesday as markets continue to assess the potential risks of a Morena super majority and the surrounding risks concerning constitutional changes in Mexico. USDMXN is currently up 1.4% on the session, having printed a high of 17.9993 so far.
  • There was a brief reprieve for the peso overnight as President-Elect Claudia Sheinbaum said Finance Minister Rogelio Ramirez de la O will remain in the position during her government. However, market anxieties remain front and centre, and the short-term path of least resistance remains higher for USDMXN, which has extended its rally to 6% from the week’s lows.
  • Commerzbank believe Sheinbaum is likely to calm the markets in the coming weeks. During the campaign, she made it clear that she intends to set her own precedent that differs from those of her mentor, AMLO. In practice, she is likely to try to reassure the market that she will hold off on some of the more controversial issues for the time being.
  • In the coming months, Commerz believe MXN stabilisation is more likely to depend on whether the president-elect strives to reduce the state's significant deficit somewhat. And whether the Bank of Mexico will react with a more restrictive monetary policy if the fiscal deficit increases inflationary risks.

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