USD/MXN: Peso remains strong after cabinet reshuffle in Mexico

The USD/MXN pair remains near the lowest levels in more than a month. It is hovering slightly above 18.50 after falling on Monday to 18.44. It is trading between two technical areas 18.50 and 18.70, consolidating a 4% decline from November highs. 

Changes at Banxico and at the Finance minister 

The Mexican peso remained steady, holding firm to monthly gains after a cabinet reshuffle. President Peña Nieto named Alejandro Díaz de León, a deputy governor of the Bank of Mexico as the next governor. Agustín Carstens is leaving his position tomorrow to run the Bank for International Settlements. 

José Antonio Meade, resigned on Monday as Mexico’s finance minister and announced his intention to run for president in next year’s election for the ruling party, the Institutional Revolutionary Party. The new finance minister is Jose Antonio Gonzalez Anaya. 

In his first interview after being nominated as Banxico governor, Diaz de Leon mentioned that inflation may not fall as forecast because of recent and future shocks. “We cannot assume that the disinflationary path will necessarily go as expected. Actually, we have already highlighted in the last inflation report and the last monetary policy communique that the outlook for inflation has deteriorated in the last months”, he said. 

The latest growth report showed that the Mexican economy contracted 0.3% during the third quarter and expanded 1.5% versus the same quarter of last year. 

“Added uncertainty regarding the future of NAFTA is having its effects on investment in the country and this could jeopardize economic growth further during the last quarter of the year and into next year. Furthermore, the fact that Andrés Manuel López Obrador (AMLO) is leading the presidential polls ahead of next year’s  presidential elections is probably injecting more uncertainty in an already uncertain environment for the Mexican economy and its insertion in the North American market”, mentioned analysts from Wells Fargo. 

USD/MXN Technical levels

To the downside, a consolidation below 18.50 would open the doors for a slide toward the next support area seen at the 18.30 zone; below the next support might lie at 18.15. On the upside, the immediate resistance lies at 18.68/70 (Nov 23 & 24 high, 32.8% Fibonacci retracement of last rally), 18.90 (Nov 2 & 17 low) and 19.05.