In October the Mexican peso appreciated from 22.073 to 21.235. Notwithstanding, a combination of sluggish fiscal response to the pandemic, uncertainty over the health outlook and some controversial government’s policies will continue to weigh on economic recovery, limiting the pace of MXN appreciation expected ahead, per MUFG Bank.
Key quotes
“Some market analysts and the IMF have improved their GDP perspectives for this full year with a bounce-back in manufacturing driven by external demand, despite the weak domestic demand. But still, the perspectives are of a sharp contraction around 9%.”
“In early October, president Lopez Obrador announced an infrastructure plan to be developed with the private sector, totalling MXN297 B (USD14 B). However, an inefficient decision-making process, limited and unattractive opportunities and the president’s reluctance to open up the energy sector to more private participation, maintain low business confidence, thus dampening the economic outlook.”
“The path of the Mexican economy and particularly the Mexican Peso might also be influenced by the outcome of the US presidential elections, considering their strong inter-linkages. Regardless the winner, the end of political uncertainty with the election of the American president might lead to an immediate reaction of stronger Mexican peso and higher investor confidence. However, we still see room for some MXN depreciation in the short-run (now at 22.000 level for December 2020 versus our former call of 22.500) once there is a scarcity of plans released by both candidates with regards to relations with Mexico.”
“MXN might appreciate somewhat in 2021 amid improving global economic outlook.”
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