• Mexican Peso erased its earlier losses yet remains fragile after hitting 14-month low of 18.65 earlier.
• Political turmoil in Europe and Mexico's domestic reforms contribute to emerging market currency volatility.
• USD/MXN traders focus on upcoming US CPI data and FOMC decision, expected to trigger volatility in the pair.

The Mexican Peso stabilized against the US Dollar on Monday, following remarks  from outgoing President Andres Manuel Lopez Obrador. Nevertheless, Morena’s Party leader Mario Delgado insisted on AMLO’s reforms submitted in February of 2024, a headwind for the emerging market currency. Therefore, the USD/MXN trades at around 18.41, printing modest gain of 0.04%.

Risk appetite seems to have deteriorated amid political turmoil in Europe, triggering a flight to safety and hurting emerging market currencies. The Greenback remains firm against a basket of six currencies while traders await the Federal Open Market Committee (FOMC) interest rate decision on Wednesday.

Back to Mexico’s domestic issues, Mexican President AMLO stated that he will not ask the incoming president to hurry the passage of constitutional reforms. That has calmed the financial markets following last week’s remarks of President AMLO and Morena’s Mexican Congress leader Ignacio Mier, with both stating they would pass the judicial reform and the disappearance of autonomous bodies.

Earlier, the Mexican Peso hit a 14-month low as the USD/MXN reached 18.65 before reversing its course.

Last Thursday, Mexico's President-elect Claudia Sheinbaum said that “no decision had been made on a package of constitutional reforms put forward by [the] outgoing president,” via Reuters.

USD/MXN traders should know that the pair will be extremely sensitive and volatile amid political uncertainty in Mexico.

Aside from politics, Mexico’s economic docket will feature Industrial Production for April. Across the border, on Wednesday, US Consumer Price Index (CPI) data from May is expected to remain stickier, ahead of the Federal Reserve’s (Fed) monetary policy decision.The latest US data suggests that the Fed will keep rates unchanged and adhere to its “higher for longer” mantra.