USD / MXN rises modestly and returns to the 19.90 zone

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  • The Mexican peso loses ground for the second day in a row against the dollar.
  • USD / MXN remains in the recent range, with a lateral direction.

USD / MXN is trading slightly higher on Wednesday around the 19.90 area, after bouncing from 19.83. The rises occur in a general context where the dollar gained momentum in the last hours.

The price has been moving around 19.90 for more than a week, facing strong resistance around 20.00 and at the same time with support at 19.80. As long as it remains confined to that range, limited tours would be expected.

Risks go up for the MXN

Last Friday it was known that Alejandro Díaz de León will not continue as governor of the Bank of Mexico once his term ends at the end of the year. President Andrés Manuel López Obrador will not ratify it and will seek to replace him with someone who gives a “social and moral dimension” to the central bank. For now, Gerardo Esquivel (member of the current Governing Board) and Arturo Herrera (Secretary of the Treasury) appear as candidates.

The change in the maximum position of the Bank of Mexico implies a great risk for the Mexican peso. Their positions are elected by the executive branch and if they look for a person, or take the bank to a position of worrying more about growth than inflation, the Mexican peso should be affected.

The novelty also comes at a time when AMLO criticized the central bank for not sending surpluses to the government, that is, the profits it obtained. These gains mostly arise when the Mexican peso is devalued. If we continue in this direction, the confidence and independence of the central bank may be damaged. These days, AMLO affirmed that he will guarantee the independence of the institution.

The other growing risk for the Mexican peso is the June 6 elections. The electoral results and the proposals that may arise before and after add risks in both directions to the Mexican currency and assets. A survey published in the newspaper El Financiero indicates that 60% of Mexicans expect post-electoral conflicts to exist.

Technical levels

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