The Mexican Peso (MXN) is extending its decline on Tuesday after a brief pause, following a significant drop on Monday due to the results of the Mexican presidential election.

Market Reaction:

• Renewed Downtrend: The Peso is resuming its depreciation after a temporary stabilization.
• Key Pair Exchange Rates: USD/MXN trades at 17.87, EUR/MXN at 19.47, and GBP/MXN at 22.86.

Peso Weakness Attributed to Morena Party Victory:

• Landslide Win for Sheinbaum: Claudia Sheinbaum’s victory and Morena’s potential supermajority in Congress raised investor concerns.
• Fears of Anti-Market Reforms: Investors are apprehensive about potential constitutional changes, such as electing judges by popular vote and prioritizing state-owned energy companies.

Supermajority Uncertain:

• Official Results Pending: Final results will be released between June 5-8.
• Bloomberg Estimates: Morena may achieve a supermajority in Congress but fall short in the Senate.
• Potential for Negotiating Reforms: Even without a supermajority, Sheinbaum could negotiate key reforms with a few senators.

Potential Upward Pressure:

• Pro-Growth Policies: Sheinbaum’s proposed minimum wage increase, improved welfare benefits, and government investment could boost consumer spending and economic growth.
• Interest Rate Impact: Higher interest rates to manage inflation could support the Peso despite investor worries.

Technical Analysis (USD/MXN):

• Trendline Breakout: A decisive break above a major trendline suggests a potential shift in the pair’s outlook.
• Bullish Short- and Intermediate-Term Trends: Further upside is possible towards April highs (around 17.92) and potentially 18.12 (100-week SMA) or 18.49 (October 2023 high).
• Long-Term Uncertainty: The long-term trend remains unclear, with a downside risk if the uptrend loses momentum.

Overall:

The Mexican Peso’s current weakness reflects investor concerns about potential policy changes under a Morena supermajority. However, potential pro-growth policies and interest rate considerations could offer some support. The technical indicators suggest a short- to medium-term uptrend for USD/MXN, but the long-term outlook remains uncertain.