Mexico City.- JPMorgan Chase & Co trimmed its long-standing bullish stance on the Mexican peso, warning traders that they should be mindful of risks arising from a “highly unpredictable” US presidential election, Bloomberg reported.
The bank downgraded the peso from overweight to market weight amid potential risks related to the vote pitting Kamala Harris against Donald Trump next month.
Traders are anxious about what the next U.S. leader’s approach will be on issues ranging from tariffs to the upcoming review of the USMCA trade deal. “Although we do not see a Trump victory as a clear negative for the MXN in the medium term, we recognize that the currency is vulnerable to the electoral results,” strategists such as Tania Escobedo Jacob and Saad Siddiqui wrote in a note.
Traders, they say, need more visibility on the trade policies that the United States would follow to evaluate the direction of the currency in the medium term.
In Mexico, the delivery of a “reasonable” budget next month is also necessary for the currency to continue stabilizing. The peso has had a rollercoaster year so far, going from the best performer in emerging markets to one of the worst after a landslide victory for the ruling party in June elections stoked fears of radical reforms that could erode checks on their power. Since taking office this month, President Claudia Sheinbaum has helped ease volatility by winking to the private sector, saying foreign and private investments will be respected, according to JPMorgan. The currency could face additional relief under certain trade scenarios, especially as positioning appears “clean” and valuations are attractive, strategists say. “We are predisposed to try to re-engage in bullish MXN operations after the US elections,” they said.
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