The #Trump Trade
The Mexican peso has remained volatile due to numerous factors, including the price of crude oil, prospects of the Brexit and, more interestingly, the potential of a Donald Trump presidency in the U.S.
The USDMXN had been on a steady bullish trend, and the peso's dramatic nine percent decline going into the first U.S. debate on September 26 was largely in part to the "Trump effect" as he was within two points of Democratic candidate Hillary Clinton. However, after a series of miscues from Trump and sporadic polling performance, the Mexican peso began to strengthen considerably.
A closer look at Donald Trump's immigration policy:
Trump aims to protect the jobs, thus wages, through tougher immigration by hindering the flow of undocumented foreign workers and immigrants. The keystone of the immigration plan is to build a physical border-wall, which is not particularly unheard of.
For instance, due to the constant flow of political and economic refugees from the Middle East into Europe, many European countries have greatly increased their immigration policies to help monitor refugee movement. Nations, such as Serbia, Bulgaria and Hungary, are clamping down due to the potential safety concerns to its citizens, as well as controlling the financial strain due to the unfettered flow of migrants. Larger, developed nations, like the United Kingdom, is aiming to build a wall to prevent migrants crossing from the "Calais Jungle," which is a French migrant camp of 10,000 looking to cross into Britain.
What is concerning for Mexico is that Trump is almost unwilling to alter his plan for a border well while making Mexico pay for it. Trump has proposed that Mexico will pay the U.S. government between $5 and $10 billion as a one time payment or face the consequence freezing all incoming money wires into Mexico.
Trump's outline says the Mexican economy benefits from $24 billion from Mexican nationals that work within the U.S. and calls it "de facto welfare." It is true that the Mexican economy greatly benefits, and the blockage of incoming dollars would have a net-negative effect on their economy; it would also have a net-negative affect on the U.S.-Mexican relationship.
We expect the peso to remain elevated as long as Hillary Clinton remains ahead in the polls, but, considering the overwhelming evidence of potential collusion between the "mainstream" media and the Clinton campaign, there is a potential for an upset which would undoubtedly send ripples throughout risk assets, including the peso.
For the meantime, we can see the USDMXN trending lower to 18.52 with a secondary level near the 200-day EMA.
Another interesting "Trump trade" is the RUBMXN. With tensions between the current Obama administration and Russia, as well as elevated rhetoric from Clinton, the ruble could see a great deal of volatility heading into the U.S. election. Trump, who has no obvious ties to Russia, has stated that he would aim to develop a partnership between the two nations.
Following the debate, to which a CNN poll containing a meager sample of less than 550 likely voters show Clinton won the debate, the RUBMXN dropped over 1.55 percent. As rhetoric from the Democrats pick up, we expect the ruble to weaken against both the dollar and Mexican peso.
The USDMXN had been on a steady bullish trend, and the peso's dramatic nine percent decline going into the first U.S. debate on September 26 was largely in part to the "Trump effect" as he was within two points of Democratic candidate Hillary Clinton. However, after a series of miscues from Trump and sporadic polling performance, the Mexican peso began to strengthen considerably.
A closer look at Donald Trump's immigration policy:
Trump aims to protect the jobs, thus wages, through tougher immigration by hindering the flow of undocumented foreign workers and immigrants. The keystone of the immigration plan is to build a physical border-wall, which is not particularly unheard of.
For instance, due to the constant flow of political and economic refugees from the Middle East into Europe, many European countries have greatly increased their immigration policies to help monitor refugee movement. Nations, such as Serbia, Bulgaria and Hungary, are clamping down due to the potential safety concerns to its citizens, as well as controlling the financial strain due to the unfettered flow of migrants. Larger, developed nations, like the United Kingdom, is aiming to build a wall to prevent migrants crossing from the "Calais Jungle," which is a French migrant camp of 10,000 looking to cross into Britain.
What is concerning for Mexico is that Trump is almost unwilling to alter his plan for a border well while making Mexico pay for it. Trump has proposed that Mexico will pay the U.S. government between $5 and $10 billion as a one time payment or face the consequence freezing all incoming money wires into Mexico.
Trump's outline says the Mexican economy benefits from $24 billion from Mexican nationals that work within the U.S. and calls it "de facto welfare." It is true that the Mexican economy greatly benefits, and the blockage of incoming dollars would have a net-negative effect on their economy; it would also have a net-negative affect on the U.S.-Mexican relationship.
We expect the peso to remain elevated as long as Hillary Clinton remains ahead in the polls, but, considering the overwhelming evidence of potential collusion between the "mainstream" media and the Clinton campaign, there is a potential for an upset which would undoubtedly send ripples throughout risk assets, including the peso.
For the meantime, we can see the USDMXN trending lower to 18.52 with a secondary level near the 200-day EMA.
Another interesting "Trump trade" is the RUBMXN. With tensions between the current Obama administration and Russia, as well as elevated rhetoric from Clinton, the ruble could see a great deal of volatility heading into the U.S. election. Trump, who has no obvious ties to Russia, has stated that he would aim to develop a partnership between the two nations.
Following the debate, to which a CNN poll containing a meager sample of less than 550 likely voters show Clinton won the debate, the RUBMXN dropped over 1.55 percent. As rhetoric from the Democrats pick up, we expect the ruble to weaken against both the dollar and Mexican peso.
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