Mexican Peso fluctuates ahead of US presidential election result


  • The Mexican Peso trades little changed as traders await news of the US presidential election. 
  • The winner could have a significant impact on the Peso in the days to come.
  • Technically, USD/MXN continues to trade below the opening chart gap it formed when it broke lower on Monday.  

The Mexican Peso (MXN) fluctuates between tepid gains and losses on Tuesday as traders await the outcome of the US presidential election. The result is likely to be an important driver of the Peso over the coming days. 

If the Democrat nominee Kamala Harris wins, it is expected to be positive for the Mexican Peso, whilst if the Republican nominee Donald Trump is victorious, the impact is likely to be negative, according to financial news website El Financiero. The difference is due to Trump’s threat to place tariffs on Mexican imports. 

The highly-rated election forecaster 538.com indicates the probability of Vice President Harris winning is 50%, whilst former President Donald Trump has a 49% chance of victory. This leaves a 1% chance of no overall winner. Over the last 24 hours, Harris has snuck into the lead after lagging Trump for several days. This may explain the Peso’s strengthening across its main pairs on Monday. 

Mexican Peso: Four US presidential election scenarios

The Mexican Peso exchange rate with the US Dollar (USD) is foreseen to fluctuate between a low of 18.30 and a high of 22.26 depending on the outcome of the US presidential election, says El Financiero.

The graphic below shows the USD/MXN in four possible US presidential election scenarios.

In the case of Harris winning and the Democrats securing a majority in Congress, the Peso is likely to strengthen to between 18.30 and 19.00 against the USD.

If Trump wins with a Republican majority in Congress, the Peso is likely to fall to between 21.14 and 22.26 to the US Dollar. 

If Kamala Harris wins the presidency but fails to get a majority in Congress, USD/MXN is likely to fluctuate between 18.80 and 19.40. 

If Trump wins without a Republican majority in Congress, the pair is likely to end up in a range between 19.70 and 21.14. 

Mexican Peso prepares for the Supreme Court vs. Sheinbaum

The Mexican Peso could face material risk from domestic political factors in the coming days as the Mexican Supreme Court decides on Tuesday whether a controversial law to reform the legal system is unconstitutional. 

The reform – which has already been voted through parliament – seeks the election of judges by popular vote rather than appointment. Supporters say it will eliminate corruption. Critics argue it will undermine the independence of the judiciary and hand the government too much power.

Mexican President Claudia Sheinbaum said she would await the Supreme Court's decision but added, “It has to be made very clear that eight justices cannot be above the people,” at a press conference on Monday. 

Supreme Court judge and critic of the reform Juan Luis González Alcántara recently proposed a compromise that would limit the election of judges to only those of the Supreme Court and not the thousands of lower court judges in Mexico. 

Anticipating delays to its proposed reforms, the Mexican parliament recently passed another law that prevents the courts from blocking the implementation of legislation. So, even if the Supreme Court decides against the implementation of the reform on Tuesday, the government may just ignore their decision and press ahead regardless. 

This would lead Mexico into uncharted territory constitutionally, according to experts, with potential implications for the economy and the foreign investor confidence in the country’s courts going forward. 

“This will lead to a constitutional crisis of a kind we have not seen for the duration of the 1917 constitution,” Olvera Rangel, a professor of law at the Universidad Nacional Autónoma de México (UNAM), was quoted as saying in The Guardian.

Technical Analysis: USD/MXN leaves gap open as it ranges

USD/MXN trades below the gap down it formed on Monday (orange shaded rectangle on the chart below). The gap formed after the pair completed a bullish Measured Move, or “abc” pattern last week. 

USD/MXN 4-hour Chart 

USD/MXN is still probably in an overall uptrend on a short, medium and long-term basis. Further, it is trading in a bullish rising channel. Given the technical dictum “the trend is your friend,” the odds, therefore, favor a continuation higher. 

Further, gaps do not tend to remain open for long, according to technical analysis, and this suggests a mild bias for prices to rise and close the gap over coming sessions. 

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.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD languishes near multi-year lows below 0.6250 after dovish RBA Minutes

AUD/USD languishes near multi-year lows below 0.6250 after dovish RBA Minutes

AUD/USD remains depressed below 0.6250 early Tuesday after the December RBA Minutes reiterated that upside inflation risks had diminished, which reaffirms bets for a rate cut in early 2025. This, along with concerns about China's fragile economic recovery and US-China trade war, undermines the Aussie and weighs on the pair.

AUD/USD News
USD/JPY eases toward 157.00 after Japanese verbal intervention

USD/JPY eases toward 157.00 after Japanese verbal intervention

USD/JPY has come under renewed selling pressure, easing toward 157.00 after Japanese Finance Minister Kato's verbal intervention. The pair erased early gains, induced by the October BoJ meeting Minutes. However, the downside could be limited as the US Dollar hold the previous rebound. 

USD/JPY News
Gold remains stuck between two key barriers amid thin trading

Gold remains stuck between two key barriers amid thin trading

Gold price is attempting another run higher while defending the $2,600 threshold early Tuesday. In doing so, Gold price replicates the recovery moves seen in Monday’s trading, which eventually fizzled out on a broad US Dollar comeback in tandem with US Treasury bond yields.  

Gold News
Solana dominates Bitcoin, Ethereum in price performance and trading volume: Glassnode

Solana dominates Bitcoin, Ethereum in price performance and trading volume: Glassnode

Solana is up 6% on Monday following a Glassnode report indicating that SOL has seen more capital increase than Bitcoin and Ethereum. Despite the large gains suggesting a relatively heated market, SOL could still stretch its growth before establishing a top for the cycle.

Read more
Bank of England stays on hold, but a dovish front is building

Bank of England stays on hold, but a dovish front is building

Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures