- The Mexican peso has fallen following rumors that Donald Trump has offered Robert Lighthizer the job of trade representative.
- The former U.S. trade representative is known for his protectionist stance and could weigh on Mexico in future negotiations.
- Concerns that the Republicans will gain a majority in Congress and achieve a “clean sweep” have further weighed on the peso.
The Mexican peso (MXN) fell among major currency pairs on Monday after ending the previous week in the negative. On Friday, the Financial Times (FT) published an article stating that President-elect Donald Trump had offered Robert Lighthizer, a U.S. attorney and known protectionist, a job as U.S. Trade Representative. , the peso depreciated by 1.86% against the US dollar (USD). Former Trump administration. Mr. Lighthizer is known as a tough negotiator, representing the United States in the ongoing free trade agreement negotiations between the United States, Mexico, and Canada, “USMCA.''
MXN has softened on concerns that President Trump will take a similarly hard line when the deal is renegotiated in 2026. In the run-up to the presidential election, President Trump vowed to impose huge tariffs on car imports from Mexico in order to curb the number of cheap cars. Mexican-made electric cars from China flood the U.S. market.
Mexican peso falls amid rumors of Lighthizer's appointment
The Mexican peso fell across the board last weekend after the FT reported that President Donald Trump had offered Robert Lighthizer the position of the new U.S. trade secretary. But a Reuters article on Friday said the opposite. One White House source said the rumors were “not true” and that Mr. Lighthizer had not been invited to the role.
In a recent report on how America's new protectionist regime will affect neighboring countries, rating agency Fitch said: Payroll tax collection will be affected. ”Such an outcome would likely reduce demand for the peso and lead to a depreciation of the peso.
Another potential risk for the peso emanating north of the border is the growing likelihood that Republicans will gain a majority in the U.S. Congress. Republicans have already won the presidency and a majority in the Senate. If they were to secure a majority in Congress, they would have a so-called “clean sweep” and would be given much more power to push through legislative policies without resistance. Additionally, six of the nine U.S. Supreme Court justices are appointed by Republicans, suggesting that Republicans hold the balance of power as a key challenger to lawmakers.
Congressional votes are still being counted. But Republicans won 214 seats to Democrats' 203, leaving just 18 seats unclaimed, according to the Associated Press. The majority threshold is 218.
According to El Financiero's forecast, the peso could weaken further against the US dollar if President Trump takes office and Republicans gain a majority in Congress. They estimate that the band for USD/MXN in such a scenario is between 21.14 and 22.26. The pair is currently trading in the 20.00s range.
However, if Republicans fail to win a majority in Congress, El Financiero predicts that Republicans will likely fall within the range of 19.70 to 21.14.
On the economic data front, the peso could see volatility later in the week when the Bank of Mexico (Banxico) holds its November policy meeting on Thursday. Although recent inflation figures were better than expected, experts say it is still likely that Banxico will cut the bank interest rate by 0.25% to 10.25%. Such a move would be negative for the peso, as lower interest rates would reduce foreign capital inflows.
Mexico's industrial production data for September showed a 0.6% month-on-month increase, compared with a 0.5% decline in August, according to data released by INEGI on Monday. On an annualized basis, sales decreased by 0.4% compared to the 0.9% year-on-year decrease recorded in August, which was lower than the expected 0.0%.
Meanwhile, the consumer confidence index in October was 48.9, up from 46.6 in September.
US bond markets are closed for the Veterans Day holiday.
Technical analysis: USD/MXN resumes uptrend
USD/MXN recovers from the base of the ascending channel and begins to rise in line with the broader uptrend.
USD/MXN daily chart
The pair appears to be renewing its short-term uptrend. A medium- to long-term upward trend has already been established. As the old adage in technical analysis goes, “trend is your friend”, which suggests that the odds are likely to increase further in the future.
A break above the November 6th high of 20.80 will likely confirm further upside. 21.00 will be the next major target and resistance level (round number, psychological support).
Frequently Asked Questions about the Mexican Peso
The Mexican Peso (MXN) is the most traded of Latin American currencies. Its value is widely determined by the performance of Mexico's economy, the policies of the country's central bank, the amount of foreign investment in the country, and even the level of remittances by Mexicans living abroad, particularly in the United States. Geopolitical developments may also move the Mexican peso. For example, the process of nearshoring, or the decision of some companies to move manufacturing capacity and supply chains closer to their home country, is also believed to be a catalyst for Mexico's currency to appreciate. An important manufacturing base in the Americas. Another catalyst for MXN is oil prices, as Mexico is a major exporter of Mexican goods.
The main objective of the Central Bank of Mexico, also known as Banxico, is to keep inflation at a low and stable level (3% target, or the midpoint of the 2% to 4% tolerance range). For this purpose, banks set appropriate interest rate levels. If inflation is too high, Banxico will try to curb it by raising interest rates, making borrowing more costly for households and businesses and cooling demand and the economy as a whole. Higher interest rates are generally positive for the Mexican Peso (MXN), as they lead to higher yields and make the Mexican Peso (MXN) a more attractive place for investors. Conversely, when interest rates fall, the Mexican peso tends to depreciate.
The release of macroeconomic data is key to assessing the state of the economy and can influence the valuation of the Mexican Peso (MXN). A strong Mexican economy with high economic growth, low unemployment and high confidence is positive for MXN. Not only will it attract more foreign investment, but it could also prompt the Bank of Mexico (Banxico) to raise interest rates, especially if this strength coincides with rising inflation. However, if economic indicators are weak, the Mexican peso may weaken.
The Mexican peso (MXN), an emerging market currency, tends to appreciate during risk-on periods, or when investors perceive the overall market as less risky and are eager to take on higher-risk investments. Conversely, during times of market turmoil and economic uncertainty, the Mexican peso tends to depreciate as investors tend to sell riskier assets and flee to more stable and safer assets.
