Mexican Peso tumbles as US election, judicial reform stir market uncertainty

• Mexican Peso depreciates against the US Dollar, as USD/MXN remains above 20.00 figure.
• Mexican Supreme Court debates judiciary reform amid rising domestic political tensions.
• US election in close race adds to Peso's depreciation as investors seek safe-haven assets.

The Mexican Peso depreciated to a new record low against the Greenback on Tuesday as the US presidential election got underway. The Mexican Supreme Court began discussing Judge Juan Luis González Alcántara Carranca's proposal to modify the controversial judiciary reform presented by the ruling party Morena. At the same time, US business activity slowed, though it remains robust. The USD/MXN trades at 20.28, up by 0.95%.

Mexico's economic docket is absent. Domestically speaking, investors focus on the Supreme Court decision amid an ongoing judicial crisis in the country.

Supreme Court Judge Juan Luis González Alcántara Carranca's proposal suggests that, "Contenders for the Supreme Court and other top courts would have to stand for election. But thousands of other judges, appointed based on years of training, would remain in their jobs," via The New York Times.

President Claudia Sheinbaum refrained from discussing the court's decision. During the same press conference, she responded to Republican candidate and former President Donald Trump about immigration, saying, "There will be a good relationship." Sheinbaum added, "There has been a 75% decrease in migrants arriving at the northern border."

Across the border, the US presidential election continues in a narrow race between Democratic Vice President Kamala Harris and Republican former president Trump. Trump's campaign recognized that the election would likely not be called this afternoon, according to CNN, citing sources.

The US economic docket revealed that the Balance of Trade deficit widened, while business activity cooled slightly. S&P Global revealed that October's service activity dipped, while the Institute for Supply Management's (ISM) Services PMI improved for the same period.

USD/MXN traders await the Federal Reserve's (Fed) monetary policy decision on November 6-7, in which the Fed is expected to lower borrowing costs by 25 bps. After that, Fed Chair Jerome Powell's press conference would be scrutinized by investors looking for cues on the Fed's policy path.

Daily digest market movers: Mexican Peso on the backfoot on US election fears

• The USD/MXN remains adrift from political turmoil in Mexico after the approval of the controversial judiciary reform.
• Analysts see Mexico's inflation moderating in October, according to Reuters.
• They project the Consumer Price Index (CPI) in October at 4.73% above the prior month's 4.58% YoY. However, core CPI is expected to decrease for the 21 straight months to 3.85% from 3.91%.
• Former US President Donald Trump's harsh rhetoric weighs on the Peso. If Trump wins, a strong US Dollar could weigh on the Mexican currency, which could depreciate sharply due to threats to impose 25% tariffs on all products.
• The US Bureau of Economic Analysis revealed the US trade deficit widened in September to $-84.4 billion from a revised $-70.8 billion. Economists estimated the less widened deficit of $-84.1 billion.
• The US S&P Global Services PMI was 55.0 in October, below the forecast of 55.3 and September's 55.2.
• The ISM Services PMI for the same period expanded to 56, from 54.9 in September, exceeding estimates of a deceleration to 53.8.
• The Federal Open Market Committee (FOMC) is expected to cut rates by 25 bps on November 7.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 49 bps of Fed easing by the end of the year.

USD/MXN technical outlook: Mexican Peso trims some losses as USD/MXN drops below 20.20

The USD/MXN reached a new yearly peak of 20.35, yet the pair has retreated below 20.20 as recent polls showed Kamala Harris up in Nevada. Despite this, the uptrend remains intact, and a break above 20.35 could open the door to challenge the 20.50 figure ahead of September. 28, 2022, high at 20.57, and the August 2, 2022, peak at 20.82.

Conversely, if USD/MXN drops further, the first support would be the 20.00 figure. Once surpassed, the next stop would be the October 24 daily low of 19.74, ahead of the 50-day Simple Moving Average (SMA) at 19.66. Once those levels are surpassed, the next support would be the October 4 cycle low of 19.10.