Mexican Peso impacted by political risk

The Peso’s weakness on Monday was partly due to investors' concerns over the Mexican government’s planned changes to the Mexican constitution, in particular in the way the judiciary is appointed. The newly approved Morena-ruled government wants to make judges elected rather than appointed. Critics say the changes will compromise the independence of the judiciary, undermining justice and democracy. 

In an interview with El Economista on Monday, Banxico Deputy Governor Galia Borja  said that, despite the bank making cuts in March and August, this does not imply the abandonment of restrictive policy. The “cuts in March and August do not mean that we are going to the neutral or accommodative territory. That will take some time. So, from now on, there will still be another period in which the restrictive monetary stance will continue,” said Borja. 

Cooler-than-expected Mexican inflation data for August, weaker retail sales in July and carry trade flows out of the Mexican Peso might have been other background factors weighing on the currency at the start of the week.