The Mexican peso has been on a downward trend for the past three months, and experts predict that this decline could continue until the end of the year. Several factors are contributing to the depreciation of the currency, and the coming months will be critical in determining whether the peso can recover or continue to weaken. Four key areas are expected to play a significant role in the peso's trajectory.
1. Market Reaction to Judicial Reform
One of the primary factors influencing the peso's decline is the ongoing uncertainty surrounding judicial reforms in Mexico. According to financial analyst Enrique Quintana, the potential approval of reforms to the Judicial Branch has already contributed to the peso's depreciation. Markets have responded negatively to the possibility of these reforms, and if they are passed, it is likely that the Mexican currency could face further devaluation. The reaction of both markets and governments to these reforms, once approved, will be crucial in determining the peso's future performance.
2. Claudia Sheinbaum’s First Presidential Address
Another significant event that could impact the peso is Claudia Sheinbaum's first speech as President of Mexico, scheduled for Tuesday, October 1. As the new leader of the country, Sheinbaum's message will be closely watched by investors, who will be looking for signs of confidence or distrust in her administration. The tone and content of her speech could either ease or heighten uncertainty within the financial sector, influencing the peso's value. A strong, reassuring address could bolster investor confidence and stabilize the currency, while a less confident message might exacerbate concerns and contribute to further depreciation.
3. U.S. Elections and Their Impact on the Peso
The U.S. elections on November 5 are expected to have a significant impact on the Mexican peso. The outcome of the election could lead to considerable fluctuations in the currency market, depending on which candidate wins. If former President Donald Trump secures a victory and follows through on his campaign promises, the dollar could rise in value, leading to a further weakening of the peso. Trump's policies, particularly his stance on tariffs and the imposition of conditions on Mexico, including border closures, could have a detrimental effect on the Mexican economy and its currency.
In contrast, if Kamala Harris wins the election, it may bring about a sense of stability and greater calm in the markets, potentially allowing the peso to recover some of its losses. However, the exact impact will depend on the policies she implements and how they are perceived by investors.
4. The Economic Package and Fiscal Deficit Reduction
Finally, the economic package that is set to be presented on November 15 will be another critical factor in determining the peso's future. The package is expected to include a proposal to reduce Mexico's fiscal deficit from 5.9% to 3%. If this forecast is fulfilled, it could have significant implications for the Mexican economy and the peso. A successful reduction in the fiscal deficit could signal to investors that Mexico is taking steps toward fiscal responsibility, potentially boosting confidence in the peso. However, if the reduction is not achieved or if the measures proposed are seen as inadequate, the peso could face additional pressure.
Outlook for the Mexican Peso
As these four key events approach, the Mexican peso remains vulnerable to further declines. The reaction of markets and governments to the judicial reforms, the content of Claudia Sheinbaum's first presidential speech, the outcome of the U.S. elections, and the economic package on November 15 will all play a crucial role in shaping the currency's trajectory.
Investors and financial analysts will be closely monitoring these developments to gauge the potential for recovery or continued depreciation. For now, the outlook remains uncertain, and the peso's fate will largely depend on how these critical events unfold in the coming months.
