• Mexican Peso plunges as fears of judicial reforms by Congress spark foreign investor sell-off.
• Political tension escalates after President Lopez Obrador halts ties with US Embassy over reform critiques.
• Trade data overlooked; smaller-than-expected trade deficit eclipsed by political focus.

The Mexican Peso tumbled sharply, sparked by foreign investors' fears that the upcoming Mexican Congress could approve the judiciary reform. Nevertheless, a commission of deputies approved the ruling on the reform, which is expected to be voted on once the new Congress takes office on September 1. This sparked fears among investors, which ditched the Mexican Peso as the USD/MXN trades at 19.64, posting gains of over 1.20%.

Mexico’s economic docket revealed that the Balance of Trade printed a deficit of $-0.072 billion, less than the $-1.35 billion expected by most analysts. However, analysts ignored this, remaining eyed on Mexico’s political developments.

The USD/MXN rose sharply after newswires revealed that Mexico’s President Andres Manuel Lopez Obrador said there is a “pause” in their relationship with the US Embassy after the Ambassador commented on proposed judicial reform.

On August 22, US Ambassador Ken Salazar said, “Based on my lifelong experience supporting the rule of law, I believe that the direct election of judges represents a major risk to the functioning of Mexico’s democracy. Any judicial reform must have safeguards that guarantee that the judiciary is strengthened and not subject to the corruption of politics.”

The Canadian Ambassador to Mexico, Graeme C. Clark, echoed some of his comments during the Mexico-Canada business forum. Clark commented that the reform has raised doubts about the stability of the legal framework in Mexico, which is essential to maintaining the confidence of foreign investors.