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Mexican Peso Faces Headwinds as Analysts Predict End of Rally

The Mexican Peso (MXN) is weakening against major currencies like the US Dollar (USD), the Euro (EUR), and the British Pound (GBP) due to a confluence of risk factors. Analysts believe the Peso’s long-term uptrend is nearing its end.

Reasons for Peso Weakness:

  • Mexican Elections: The upcoming presidential election on Sunday is likely to see the continuation of populist policies that could hinder the Bank of Mexico’s (Banxico) efforts to control inflation.
  • US Elections: The potential re-election of Donald Trump in November poses a threat, as he might reintroduce tariffs on Mexican goods.
  • Shifting US Interest Rates: The Federal Reserve’s (Fed) delayed rate cuts and the possibility of further hikes reduce the MXN’s interest rate advantage.

Analysts’ Forecasts:

  • Capital Economics: Expects the Peso to weaken to $19-$20 per USD during the next president’s term due to Mexico’s continued high spending and potential inflation challenges.
  • Rabobank: Predicts a decline in the Peso’s value as the interest rate differential between Mexico and the US narrows.

Technical Analysis (USD/MXN):

  • Short-Term Uptrend: USD/MXN is experiencing a short-term uptrend, potentially reaching 17.25.
  • Overbought RSI: The Relative Strength Index (RSI) suggests the pair might be overbought in the short term, indicating a possible pullback.
  • Medium- and Long-Term Trends: Analysts remain bearish in the medium to long term, but a break above the major trendline could signal a reversal.

The Mexican Peso is facing multiple headwinds, and analysts predict an end to its recent appreciation. The upcoming elections, potential US policy changes, and converging interest rates are all contributing factors. While the USD/MXN pair shows a short-term uptrend, the medium- and long-term outlook for the Peso remains uncertain.