US Dollar to Pesos

In the last two weeks there has been sudden shift and rise in the US Dollar against the peso. Two weeks ago The Dollar was trading at 16.5 pesos to the dollar. Today it is 18.41. I am not sure why there has been such a sudden surge. Any ideas?

RoyD

The election this past Sunday.  The Morena Party exceeded all expectations and won a super-majority in part of the MXN Congress.  Morena leans left and their new power to make constitutional changes scares the elites and business community and most investors.

AMLO overlaps the seating of the new Congress before Sheinbaum takes office so he will likely push many of his reforms that did not pass when the Morena majority was lower.   Both AMLO and Sheinbaum are Morena.

https://www.reuters.com/world/americas/mexico-constitutional-reforms-more-likely-with-super-majority-sight-2024-06-04/

Reuters wrote:If enacted, some of the reforms could aggravate a budget deficit which analysts say is likely to be a major burden for Sheinbaum once she takes office.
"Investors are not only concerned that these constitutional amendments will now be passed, but maybe that Sheinbaum, Lopez Obrador and MORENA may try to further entrench their brand of politics and economics into the constitution," said Jason Tuvey, deputy chief emerging markets economist at Capital Economics.

BisbeeGal covered it well. I would only add that the indices exchange traders use to estimate change in a currency have the Peso as one of the most unstable currencies over the next six months. Every comment by AMLO, the Presidenta-elect, and various Morena officials will cause jumps in the exchange rate, with the general trend of the Peso weakening. It won't strengthen again (significantly) until AFTER Sheinbaum is in charge, as the markets and businesses won't trust AMLO until he is gone.

If AMLO's constitutional changes go through in September, you can probably expect another significant drop.

Also remember Trump will be blowing his dog whistle that Mexico is sending "murderers and rapists" to the US.  That dialogue will weaken the peso.  Ironic that he is the one who is a convicted sex offender in addition to many other crimes.