USD/MXN Mexican Peso Under Pressure as Trump Rises in Polls

The Mexican currency has depreciated in a negative correlation with the political fate of Donald Trump.

The Mexican peso has become the proxy to trade the U.S. elections. The FBI investigation announced last Friday has almost eroded Hilary Clinton’s lead in the polls and Trump’s comments on Mexican immigration has put the currency in a position of a hedge given the high liquidity in the market.

The peso is trading at a four week high on the increased probabilities of a Trump presidency. Markets have foregone trading on fundamentals and technicals opting instead to react to changes in the political risk spectrum with a fast approaching election. This trepidation is one of the main reasons the U.S. Federal Reserve opted to play down its November Federal Open Market Committee (FOMC). Even the statement seemed muted to avoid any risk of coming across as biased. The central bank surprised no one with its decision to hold rates unchanged. Once again the Fed has painted itself into a corner and probability is still above 70 percent of a rate hike in the final FOMC meeting of the year.

The USD/MXN has risen 1.025 percent in the last 24 hours. The pair is trading at 19.4669 after the Mexican peso continues to struggle against the USD as the currency is being used as a proxy for Latin American markets as well as having a positive correlation with Secretary Clinton’s position in the U.S. election’s polls. The November 28 announcement by the FBI of a new investigation into Clinton’s emails cut her lead versus Trump and put downward pressure on the MXN.

The peso was trading under the $19 price level on Friday but is now threatening to break above $20 if the U.S. electoral anxiety continues. Global stock markets also reversed their gains as the reality of a Trump presidency hit the market. Trumps comments about Mexican immigrants and his anti-trade stance have made the MXN a natural proxy to short as Donal Trump rises in the polls.

West Texas is down 2.732 percent in the last 24 hours. The price of crude is trading at $45.22 after a record high buildup of U.S. weekly inventories. Oil stocks rose 14.4 million barrels last week due to a sudden rise in imports (9 daily million). The oil glut inn the U.S. was another factor in the fall of global oil prices. The Organization of the Petroleum Exporting Countries (OPEC) output deal continues to be a huge question mark ahead of the Vienna meeting later this month.
Market events to watch this week:

Thursday, November 3
5:30am GBP Services PMI
8:00am GBP BOE Inflation Report
8:00am GBP MPC Official Bank Rate Votes
8:00am GBP Monetary Policy Summary
8:00am GBP Official Bank Rate
8:30am USD Unemployment Claims
10:00am USD ISM Non-Manufacturing PMI
8:30pm AUD RBA Monetary Policy Statement
8:35pm CAD BOC Gov Poloz Speaks
Friday, November 4
8:30am CAD Employment Change
8:30am CAD Unemployment Rate
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change
8:30am USD Unemployment Rate

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza