November 13, 2024 (Globalinvestorideas.com Newswire) Globalinvestorideas.com, a go-to platform for big investing ideas releases market commentary from Quasar Elizundia,Expert Research Strategist at Pepperstone.
“The Mexican peso has shown a slight stabilization in the last session around 20.5, but it may continue to face significant pressure due to U.S. inflation concerns and the reelection of Donald Trump. The release of the Consumer Price Index (CPI) for October, which showed a 2.6% annual increase in line with expectations, reinforces the likelihood that the Federal Reserve will maintain its current approach of gradual rate cuts. This environment, combined with the potential political direction under the new Trump administration, presents additional risks for emerging economies closely linked to the U.S., like Mexico.
The market is watching the upcoming Fed meeting in December, where a rate cut is anticipated. The expected stability in monetary policy reflects a prudent strategy, especially in light of the recent warning from Neel Kashkari, president of the Minneapolis Fed, regarding the possibility of adjustments in monetary policy amid inflation surprises. His comment underscores a cautious approach by the Fed at a time when shelter and services inflation continues to show monthly increases.
The composition of the cabinet and a Republican-controlled Congress could enable policies that negatively impact emerging markets. Mexico, with its high trade dependence on the U.S., finds itself in a vulnerable position in the face of any changes in trade policies. Additionally, upcoming Producer Price Index (PPI) data and speeches by Jerome Powell will be key to understanding the potential operational direction of the USD and MXN.
Meanwhile, the U.S. energy sector is experiencing a slowdown in cost declines, and core inflation remains stubborn at an annual rate of 3.3%, which could work against the peso’s performance. Although stable today, the Mexican currency faces a high volatility projection in the medium term given the political and economic uncertainty stemming from the United States.”
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