The exchange rate at the end of 2019, during the first year of Andres Manuel Lopez Obrador's government, surprised the markets by the stability that the Mexican peso maintained, despite the various internal and external shocks, remaining below 19 pesos against the dollar, representing an improvement of 3.86% for the year.

When the markets closed on Tuesday, December 31st, the exchange rate was 18.90 pesos per dollar, which meant an increase of almost 6 cents for the Mexican currency compared to the previous day. At banks its sale was located up to 19.20 units.

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These figures are well below the expectation that the market had at the end of 2018. It is important to mention that in the last survey conducted by the Mexico's Central Bank (Banxico) in December of that year, private sector specialists expected the exchange rate to be at $20.70 pesos per dollar.

At that time, uncertainty about new policies that the López Obrador administration could implement, which started with such controversial steps as the cancellation of the new Mexico City airport, prevailed on market considerations. Also of great concern were the trade tensions between China and the United States and the future of the new NAFTA.

The level that the Mexican currency reached against the dollar and other emerging economy currencies was widely boasted at the National Palace, becoming part of that "other data" to which the president refers when he is questioned about the economic direction of the country and states: "We are doing well".

Even during the episodes of greater volatility, the exchange rate never touched the levels expected by the markets for 2019, since its maximum was in August when it reached $20.25 pesos per dollar, mainly a reaction to an escalation of the conflict between China and the U.S., while the minimum was in March at $18.78 per dollar.

"It could be said that during the year the price of the peso was stable, despite all the events that generated volatility in financial markets globally," said Gabriela Siller, director of economic and financial analysis at Banco Base.

In her view, this stability can be attributed to factors such as the restrictive position of the central bank, which prevented negative capital flows in the financial market, despite the interest rate cuts.

Another factor is the trade surplus. "This element has allowed the largest inflow of foreign currency to Mexico," explains Siller.

Along with the stability of the currency, López Obrador also highlighted the low inflation, which aims to close the year at 3%. The drop in consumer prices, along with a stagnant economy, were the reason for the Bank of Mexico to make four interest rate cuts this year.

Forecasts for 2020

According to expectations on the Chicago Mercantile Exchange, Mexican currency will have a good start for 2020, as they are expecting it to continue to gain ground in January. Speculative positions rose 3.9%, advancing for the third consecutive week and reaching a new record high of 158,216 contracts, each of $500,000 pesos.

For the specialist, this is due to "progress in trade negotiations between China and the United States, and progress in the ratification of the USMCA in the United States, events that will remain relevant at the beginning of 2020".

A brighter economic scenario is expected for the country next year, although still far below the expectations offered by president López Obrador, who promised up to 2% annual growth. The market forecasts that it will be half that level.

This improvement is mainly explained by the low base of comparison, since on 2019 the Mexican economy has expanded its stagnation up to the last quarter, so it is expected that the annual GDP will be 0.0%.

Although there are other projections that the government will finally pass the learning path and make a better exercise of spending -for November the sub-exercise was of $149.8 billion pesos, in addition to that construction will be activated with the National Infrastructure Plan, among other projects in the field.

But one area of concern is the possible decline in the credit rating. For Pemex, the possibilities of losing its investment grade in the first quarter of the year are wide, while the sovereign could also be punished accordingly, or due to a lack of confidence in the current administration.

In this scenario, the expectation at the end of 2019 is that next year the exchange rate will be at $20.10 pesos per dollar, with an inflation of 2.92% and after three other cuts to the interest rates, which would place it at 6.50%. All bets are off.