This Tuesday, October 22, the Mexican peso closed the session with an appreciation of 0.19 percent, equivalent to 3.8 cents, remaining at 19.94 units per dollar.
The US currency remained weak for most of the session, although some Federal Reserve (Fed) officials favor a cautious approach to subsequent interest rate cuts, the market continues to price in a tightening of 50 basis points (bp) before the end of the year.
Since last week, the negative behavior of the Mexican currency reflected, to a large extent, what a possible victory of the Republican candidate, Donald Trump, in the United States presidential elections, this coming November 5, would imply.
According to the financial firm CI Banco, in the previous weeks, global financial markets took the events of the US presidential race relatively calmly.
“Perhaps the biggest concern for the Mexican peso has to do with its proposals regarding trade policy. “Candidate Trump reiterates the need to apply strong tariffs to all imports, not only to countries with which there is a certain rivalry such as China, but also to important trading partners such as Mexico,” he pointed out.
“His rhetoric talks about unlikely topics such as tariffs of up to 300 percent on Chinese vehicles produced in Mexico,” he added.
Likewise, regarding the Treaty between Mexico, the United States and Canada (T-MEC), he noted that the former president also speaks of a renegotiation of the trilateral agreement, not a review, the one scheduled for 2026.
“Renegotiation is a very delicate matter, which would put at risk the progress made in previous years and the possibility of including new restrictive measures due to protectionist ideas,” he highlighted.
Given this panorama, he pointed out that this concern about the Mexican currency could be sustained until election day and cause additional episodes of volatility and pressure on the peso.
“Although the economic figures in the United States, particularly employment and PCE that will be known before the result, along with the geopolitical issue of the war in the Middle East, could influence the behavior of the peso at times, the electoral process will dominate the scene in the next two weeks,” he explained.
He highlighted that although the race looks very close, in terms of betting with 50 percent probabilities of a victory for either of the two candidates, in recent days in the betting markets and in more recent surveys, the participants seem to lean a little more towards Trump as the winner.
“The prospect of a second Trump term remains the main uncertainty. “A Harris presidency would probably look a lot like the status quo,” he said.
“Our feeling is that, if Trump wins, most of his most radical policy proposals would end up being delayed and/or watered down. Even, it will also depend on the result of the election in Congress, to know if it ends with the control of the two chambers,” he added.
He warned that the market generally anticipates the facts and that is why the new valuations of risk assets, with increases in volatility.
“Trump presented a political platform that includes several radical proposals with important economic and financial market implications. If implemented in full, we believe that, on net, they would result in weaker growth, higher inflation and somewhat more restrictive Federal Reserve policy,” he said.
The weakness of the dollar recorded at the close of the day led to most currencies gaining ground during the session, with the most appreciated being:
-Russian ruble with 0.75%
-Chilean peso with 0.54%
-South African rand with 0.45%
-Peruvian Sol with 0.40%,
-Australian dollar with 0.33%
-Norwegian crown with 0.31%
On the contrary, the most depreciated currencies were:
-Malaysian Ringgit with 0.48%
-Indonesian Rupiah with 0.42
-Taiwanese dollar with 0.28%
-Polish Zloty with 0.26%
-Japanese yen with 0.21%
-Danish crown with 0.18%.
