The Mexican Peso has staged a remarkable recovery after a sharp decline following the US presidential election. Although the initial market reaction to the election results was negative, the Peso has since stabilized and even strengthened.
Key Factors Driving the Recovery:
- Inflation Concerns: Higher-than-expected inflation could limit aggressive interest rate cuts by the Banco de Mexico.
- Potential Policy Challenges: The implementation of some of the President-elect’s proposed policies, such as tariffs on Mexican imports, may face significant challenges.
- US Dollar Outlook: The potential for further US interest rate cuts and a weaker US Dollar could support the Peso.
- Economic Data: Positive economic data, such as stronger-than-expected auto exports, has also contributed to the Peso’s recovery.
Technical Analysis:
While the USD/MXN pair has shown some weakness, it remains in a long-term uptrend. A break above the recent high of 20.80 could signal further upside potential. However, a break below the 20.00 level could indicate a potential downward correction.