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The Mexican Peso (MXN) continues recovering on Friday on the back of optimism regarding incoming-President Claudia Sheinbaum\u2019s top cabinet picks and the expectations that higher interest rates in Mexico will continue attracting foreign capital to its shores.\u00a0<\/p>\n
USD\/MXN shrugs off higher-than-expected US flash S&P Global PMI<\/a> data for June despite it showing a brighter outlook for both Manufacturing and Services sectors of the US economy, and supporting Dollar-pairs more broadly.\u00a0<\/p>\n At the time of writing, one US Dollar (USD) buys 18.20\u00a0Mexican Pesos, EUR\/MXN is trading at 19.45\u00a0and GBP\/MXN at 23.00.<\/p>\n The Mexican Peso strengthened on Thursday after Claudia Sheinbaum\u2019s announcement of six of her cabinet ministers was well received by markets. The list includes several leading academics and public servants who served with her during her time as Mayor of Mexico City.\u00a0<\/p>\n Heading up the Economy Ministry will be Marcelo Luis Ebrard Casaub\u00f3n, the former head of Foreign Affairs under President Andres Manuel L\u00f3pez Obrador (AMLO). Ebrard Casaub\u00f3n left the ministry in 2023 to run against Sheinbaum for the Morena party nomination. He has a long background in government administration and was President of the United Nations Global Network on Safer Cities, which focuses on fostering sustainable development. He thus shares Sheinbaum\u2019s concerns about climate change.\u00a0<\/p>\n \u201cEbrard will have to take on the renewal of a free trade agreement with the United States and Canada and increase foreign investment, another well-received announcement,\u201d said Gabriela Siller, Director of Economic Analysis<\/a> at Banco Base, to Associated Press (AP) News. Siller added that despite the appointment, market concerns had \u201cnot disappeared\u201d following the election.\u00a0<\/p>\n For the other roles, Sheinbaum chose Juan Ram\u00f3n de la Fuente, former rector of her alma mater the National Autonomous University of Mexico (UNAM), as Secretary of Foreign Affairs.\u00a0<\/p>\n Alicia B\u00e1rcena will serve as Secretary of Environment and Natural Resources.\u00a0<\/p>\n Rosaura Ruiz Guti\u00e9rrez, a biologist who worked at UNAM and under Sheinbaum when she was Mayor of Mexico City, was chosen as head of a new ministry overseeing science, humanities, technology and innovation.\u00a0<\/p>\n Ernestina Godoy, the Chief Prosecutor for Mexico City, was chosen as Sheinbaum\u2019s legal adviser and Julio Berdegu\u00e9 Sacrist\u00e1n, an agronomist with a long academic trajectory, was her choice for the Secretary of Agriculture and Rural Development, reported Associated Press News.\u00a0<\/p>\n The Mexican Peso is likely to remain supported by the relatively high interest rates in Mexico (11.00%) which make it one of the most attractive currencies to buy in the carry trade, according to Christian Lawrence, Senior Strategist at Rabobank.\u00a0<\/p>\n The \u201ccarry trade\u201d is a type of investment in which investors borrow in a currency with low interest rates<\/a>, like the Japanese Yen (JPY), and buy a currency with a high interest rate like the Mexican Peso.\u00a0<\/p>\n \u201cThe main driver of MXN outperformance has been its position as the world\u2019s most attractive carry currency and that remains true and will remain true in the coming months,\u201d Lawrence told FXStreet<\/a>.\u00a0<\/p>\n This also makes it expensive for most traders to hold shorts positions in the Mexican Peso for long periods of time, he adds, reducing the chances of a long-term bearish change in trend.<\/p>\n The Mexican Peso is likely to continue benefiting from its relatively high interest-rate differentials as the Bank of Mexico (Banxico) will probably not make a further interest-rate cut at its June 27 meeting \u2013 as had previously been expected \u2013 analysts at Standard Chartered (SC) say in a note on Thursday.<\/p>\n \u201cWe now expect Banco de M\u00e9xico (Banxico) to stay on hold instead of cutting by 25bps at its 27 June meeting, amid sharp currency depreciation driven by elevated political noise and fiscal uncertainty,\u201d says the bank.\u00a0<\/p>\n Currency depreciation will lead to imported inflation, according to SC, which will add to existing stubborn inflation in Mexico. This, in turn, will prevent the Banxico from pressing the trigger on rate cuts, supporting the Peso in the process.\u00a0<\/p>\n USD\/MXN continues leaking lower after rolling over from its 18.99 peak reached on June 12.\u00a0<\/p>\n Whilst it is possible the correction could have further to run, the short and medium-term trends are still bullish, suggesting price will eventually turn around and start rising again. The next target higher is situated at 19.22 (March 2023 high).<\/p>\n A break above June 14 high at 18.68 would provide additional confirmation of more upside towards the target at 19.22.<\/p>\nMexican Peso regains investors confidence after cabinet choices<\/h2>\n
High interest rates have Peso\u2019s back \u2013 Rabobank<\/h2>\n
Banxico to leave rates unchanged in July \u2013 Standard Chartered\u00a0<\/h3>\n
Technical Analysis: USD\/MXN continues correcting<\/h2>\n
USD\/MXN Daily Chart\u00a0<\/h3>\n
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