• Mexican Peso falls sharply after Dr. Claudia Sheinbaum’s victory and Morena’s majority in Congress.
• Concerns rise over potential constitutional changes and market stability, impacting investor sentiment toward the Peso.
• Sheinbaum pledges to maintain financial discipline and Bank of Mexico autonomy, but market remains wary.

The Mexican Peso plunges against the US Dollar during the North American session following Dr. Claudia Sheinbaum’s overwhelming victory in Mexico’s presidential election. Additionally, her party, Morena, won the majority of the Mexican Congress, opening the door to change the Mexican Constitution, which was seen by investors as a threat to the status quo. The USD/MXN trades at 17.66, with more than 4% losses.

The Mexican Peso began its landslide after the Instituto Nacional Electoral (INE) revealed Sheinbaum’s party, Morena, would have the majority in both houses of the legislature. This opens the door to making structural changes that involve reforming the judicial system, which could be greatly influenced by the president.

Following the INE announcement, Sheinbaum compromised to continue the current plant from President Andres Manuel Lopez Obrador’s (AMLO) government. She pledged to maintain financial discipline and emphasized the autonomy of the Bank of Mexico.

Sheinbaum added, “There wouldn’t be real increases to fuels or electricity,” populist promises previously made by AMLO.

Analysts via Reuters commented that a Morena-led congress could be reluctant to “approve the necessary reforms to adopt the measures required to attract investment,” which could leverage the nearshoring opportunity, said Alberto Ramos of Goldman Sachs.

Most analysts were expecting Sheinbaum’s victory but not the overwhelming result in the Mexican Congress.

Andres Abadia of Pantheon Macroeconomics added, “The potentially qualified majority could open the door for (her party) Morena to increase the concentration of power and pose a threat to institutional checks and balances.”

Lastly, Chris Turner of ING added, "The question is whether the Morena party has done so well that it could command a super-majority and try to pursue market non-friendly policies of constitutional reform.”