- Mexican peso drops against US Dollar after presidential elections.
- Left candidate, Andrés Manuel López Obrador (AMLO), wins election by a landslide.
- US Dollar rises against Emerging Market currencies.
The Mexican peso is falling against the US Dollar after the victory of AMLO. The left candidate won by a wide margin and also secured a relevant amount of seats at the Parliament. The victory was already priced in.
USD/MXN dropped to 19.65 after the initial results and then bounced to the upside. During the American session reached 20.20, the highest level since last Thursday. Afterward pulled back modestly but it was holding on top of 20.00, consolidating gains and moving away from last week lows.
The decline of the Mexican peso was in line with the move around Emerging Market currencies that are also lower versus the US Dollar, affected by risk aversion. So far, the reaction to AMLO’s victory has been limited.
MXN outlook
“Although our 1mth forecast for USD/MXN reaching 21.5 is looking far less likely to be achieved, we are reticent to jump on the long MXN bandwagon at current levels. There is certainly the potential for a move down into the lower 19s and carry will be a powerful driver but we remain bullish USD and see the risk of further rate increases from Banxico as much lower than the market is pricing for given a 25bp hike is fully priced in”, wrote analyst at Rabobank.
They see some room for disappointment and favor a move up towards 21 on a one month view with a three-month forecast of 20 and a 6-month forecast of 20.5.
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