Home Forex The Mexican peso falls over 3% due to concerns about Morena controlling the government.

The Mexican peso falls over 3% due to concerns about Morena controlling the government.

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The Mexican peso falls over 3% due to concerns about Morena controlling the government.

Mexican Peso Plummets Amid Political Turmoil

The Peso Takes a Dive

Unforeseen Election Results Spark Market Concerns

The Mexican peso experienced a significant decline of over 3% against the dollar following the recent election results, raising fears of potential constitutional changes that could weaken existing checks and balances. Claudia Sheinbaum’s sweeping victory in the presidential election, combined with the strong performance of the ruling Morena party, caught markets off guard. This outcome has raised concerns about the party’s ability to implement constitutional reforms without opposition support.

Market Turbulence and Uncertainty

Fears of Super-Majority Rattle Investors

The peso dropped to a five-week low of 17.5020 against the dollar, marking its most significant decline since September 2020. While the currency has since slightly recovered, trading at 17.4708, worries persist about the potential implications of a super-majority for Morena. Chris Turner of ING highlighted concerns that the party might pursue policies that are unfavorable to the market through constitutional amendments.

Political Landscape and Economic Impact

Sheinbaum’s Victory and Market Response

Sheinbaum’s landslide win, with an estimated 58.3% to 60.7% of the vote, raises the possibility of a two-thirds super-majority for Morena. This outcome could pave the way for significant constitutional reforms proposed by President Lopez Obrador earlier this year. These reforms, including judicial, electoral, and environmental changes, have heightened market anxieties and contributed to the peso’s recent struggles.

Economic Challenges Ahead

Continuing Reforms Amidst Fiscal Constraints

Despite Lopez Obrador’s past successes in reducing poverty and strengthening the economy, Sheinbaum faces challenges in sustaining these gains while addressing the country’s budget deficit and low growth. Her commitment to expanding welfare programs could prove challenging in the current economic climate, further complicating Mexico’s path forward.