<\/p>\n
The Mexican Peso (MXN) is resuming its downtrend on Tuesday following an over 4% decline in its key pairs on Monday. The Peso went into freefall after early indications showed President-elect Claudia Sheinbaum and her Morena party were heading for a landslide victory in the Mexican presidential and congressional elections held on Sunday.\u00a0\u00a0<\/p>\n
USD\/MXN is exchanging hands at 17.79\u00a0at the time of writing, EUR\/MXN is trading at 19.34 and GBP\/MXN at 22.73.\u00a0<\/p>\n
The Mexican Peso plummeted on Monday after a quick count by the National Electoral Institute showed Claudia Sheinbaum leading with at least 59% of the vote in the presidential elections, and her Morena party poised to possibly clinch super majorities in both houses of the Mexican legislature, according to Aljazeera News<\/a>. The official results will be published after the votes are counted between June 5-8.\u00a0<\/p>\n The Mexican Peso weakened significantly after investors became nervous Sheinbaum\u2019s Morena party could win super majorities \u2013 defined as a majority of two thirds \u2013 in both the Congress and the Senate. This would enable them to enact proposed reforms to the Mexican constitution, such as the election of the judiciary by popular vote and the preferential treatment of state-owned energy companies over\u00a0 private corporations. Critics argue such changes could be anti-democratic and market unfriendly.\u00a0<\/p>\n According to estimates by Bloomberg Economics, Morena will probably win a super majority in Congress but fall four-seats short of one in the Senate.\u00a0<\/p>\n \u201cAlthough that doesn\u2019t immediately allow Sheinbaum to make changes to the constitution that have eluded [current President] Andres Manuel Lopez Obrador, it leaves her in the position to negotiate with just a few senators to pass key reforms,\u201d said Bloomberg News\u2019 Economy and Government reporter Alex Vasquez.\u00a0<\/p>\n Yet not all of Sheinbaum\u2019s policies will necessarily hurt the Mexican Peso. Her pledge to increase the minimum wage by around 11%, better welfare benefits and government-led investment could increase consumer spending and economic growth, forcing the Banco de M\u00e9xico (Banxico) to maintain high interest rates<\/a>, according to Kimberley Sperrfechter, Emerging Markets Economist at Capital Economics.\u00a0<\/p>\n Since relatively high interest rates attract more foreign capital inflows, the Peso could remain well-supported despite investor fears.<\/p>\n USD\/MXN \u2013 or the number of Pesos that can be bought with one US Dollar<\/a> \u2013 breaks above a long-term trendline, marking a major shift in the outlook<\/a> for the pair and probably reversing the intermediate-term downtrend to an uptrend.\u00a0<\/p>\n With both the short and intermediate trends bullish, the odds favor more upside over those time frames (up to six months).\u00a0<\/p>\nTechnical Analysis: USD\/MXN breaks decisively above major trendline<\/h2>\n
USD\/MXN 4-hour Chart\u00a0<\/h3>\n