The Mexican Peso (MXN) is trading marginally lower on Tuesday, continuing its downward trend since April. Investor concerns about the government’s ability to pass a controversial judicial reform bill and lower inflation data have put pressure on the peso.
Judicial Reform Concerns
The government’s proposed judicial reforms, which would allow judges to be elected rather than appointed, have raised concerns among investors about potential negative impacts on inbound investment and the economy. The bill is currently being debated in the Senate, and its passage could have significant implications for the Mexican Peso.
Lower Inflation and Interest Rate Expectations
The release of lower-than-expected inflation data for August has increased expectations that the Bank of Mexico (Banxico) will cut interest rates at its next meeting. This would be negative for the Peso as lower interest rates could reduce foreign capital inflows.
Geopolitical Factors
The Mexican Peso could be finding support from long-term geopolitical shifts, as former President Donald Trump has threatened to impose tariffs on countries that refuse to trade in US Dollars. This could potentially benefit Mexico as an intermediary in global trade.
Technical Analysis
USD/MXN is trading within a gently ascending mini-channel, indicating a bullish trend. A break above the year-to-date high of 20.15 could confirm a continuation of this trend, with the next target at the upper channel line in the 20.60s. However, a decisive break below the mini-channel lows could signal a potential downtrend.