Galen Stops looks at the drivers behind the appreciation of the Mexican peso and asks whether the rally can continue.
Few, if any, saw this coming.
After Donald Trump won the US presidential race in November 2016, USD/MXN went from 18.03 up to 20.89, and by the time of his inauguration in January 2017, the exchange rate was up to 21.58.
This depreciation of the peso seemed eminently reasonable at the time, given that on the campaign trail Trump had promised to renegotiate the North American Free Trade Agreement (Nafta) in America’s favour or terminate the agreement altogether, not to mention building a border wall between the US and Mexico at the latter’s expense.
The North American Free Trade Agreement (NAFTA) is the top macroeconomic issue that will affect the Mexican peso this year, according to the results of a Bloomberg foreign exchange survey announced today.
After polling more than 100 financial professionals in Mexico, Bloomberg found that 46% said that NAFTA is the macroeconomic factor that will have the biggest impact on the peso.
Meanwhile, 34% of attendees said that the peso would be most affected by the presidential election on July 1.