Puerto Vallarta, Mexico – The Mexican peso fell sharply on Tuesday, reversing gains made earlier in the week as market attention turned to the Senate’s upcoming discussion of the judicial reform proposed by President Andrés Manuel López Obrador. The peso broke the psychological 20-unit barrier, trading at 20.0573 per dollar by morning, a decrease of 0.89% compared to Monday’s Reuters reference price.
The drop in the peso is largely attributed to market uncertainty surrounding the outcome of the judicial reform debate, which has become a point of contention within Mexico’s political landscape. President López Obrador’s judicial reform seeks to overhaul key aspects of the Mexican legal system, focusing on the structure and operation of the judiciary, which his administration argues is necessary to combat corruption and streamline justice. However, critics of the reform warn that it could undermine judicial independence.
“Today, the peso cut back on the advance of the previous session, due to the nervousness of the markets around the discussion of the judicial reform in the Senate. The vote for its approval is expected to take place between Wednesday and Thursday,” said Monex in a note to its clients, highlighting the volatility surrounding the peso in light of the political developments.
The Mexican currency had shown positive momentum at the start of the week, buoyed by investor optimism and steady economic performance indicators. However, the judicial reform debate has triggered market apprehension, with investors wary of the potential impact of the reforms on the country’s legal and political framework.
Political Uncertainty Weighs on Markets
The political climate in Mexico has been tense in recent weeks as the proposed judicial reform moves through the legislative process. López Obrador has repeatedly defended the reforms, claiming they will strengthen the rule of law and reduce corruption within the judiciary, a system often criticized for inefficiency and alleged bias.
Opposition parties, civil society groups, and legal experts have voiced concerns that the reforms could weaken judicial autonomy by giving the executive branch greater influence over the appointment of judges and the administration of the courts.
As the debate unfolds, markets remain cautious, and further fluctuations in the peso are expected depending on the outcome of the Senate vote. “The next 48 hours will be crucial for the peso, as the reform’s approval or rejection will have significant repercussions on investor sentiment,” noted an economist at Banco Base.
Global Factors Also Impacting the Peso
Adding to the peso’s woes are developments abroad, with investors looking ahead to the first presidential debate in the United States between Democratic candidate Kamala Harris and Republican contender and former president Donald Trump, scheduled for later today. The upcoming U.S. presidential election on November 5 is a key factor influencing global markets, and any signs of heightened volatility in the U.S. political scene could spill over into Mexican financial markets.
While there is no major economic data on the agenda this week that could significantly sway the peso, global market movements tied to the U.S. election and ongoing geopolitical tensions remain important factors to watch.
Outlook for the Peso
Financial analysts predict that the peso will continue to experience volatility in the near term, particularly as the judicial reform debate in Mexico intensifies. Should the Senate approve the reforms, it could trigger further declines in the peso as investors digest the potential long-term consequences for the country’s legal framework. Conversely, a rejection of the reforms could provide some relief to the markets, potentially stabilizing the peso.
With global uncertainties, particularly around the U.S. election, also weighing on markets, traders are advised to remain cautious and monitor developments closely.
“The peso is in for a bumpy ride, as both domestic and international factors are at play,” said a senior trader at CI Banco. “We expect continued pressure on the currency as the political situation unfolds, with potential sharp movements depending on the Senate’s decision.”
As Mexico’s legislative process continues to draw international attention, the next few days will be critical for the country’s economic and political landscape. All eyes are now on the Mexican Senate and the U.S. political debate, both of which will play a crucial role in shaping the peso’s trajectory in the coming weeks.
Puerto Vallarta, Mexico - The Mexican peso fell sharply on Tuesday, reversing gains made earlier in the week as market attention turned to the Senate's upcoming discussion of the judicial reform proposed by President Andrés Manuel López Obrador. The peso broke the psychological 20-unit barrier, trading at 20.0573 per dollar by morning, a decrease of 0.89% compared to Monday’s Reuters reference price.
