U.S. withdrawal from NAFTA is biggest threat to Mexico’s peso

March 28, 2018

The North American Free Trade Agreement (NAFTA) is the top macro-economic issue that will affect the Mexican peso this year, based on the findings of a Bloomberg foreign exchange (FX) poll released on March 27.

More than 100 financial professionals responded to a poll during Bloomberg’s FX18 Mexico City event in mid-March, with nearly half (46%) saying that NAFTA is the factor that will have the biggest impact on the peso. Fewer (34%) said that the peso would be most affected by Mexico’s presidential election on July 1.

Already, President Donald Trump’s new U.S. tax law—which cut corporate taxes nationwide as of New Year’s Day—has made Mexico less attractive to American businesses.

Now, the threat of duties on goods imported from Mexico, if the POTUS backs out of the NAFTA deal, is threatening the economy of our third-largest goods trading partner.

When asked what they expect the exchange rate between the dollar and the peso (USD/MXN) to be by the end of 2018, the majority (71%) of respondents said it would be between 18.00 and 20.00. (On March 27 one U.S. dollar was equal to 18.3696 Mexican pesos, according to the website, xe.com.) Only 17% said it would be higher than 20.00; and 12%, below 18.00.

The previous all-time low, hit in January 2017, saw the dollar buying 21.11 pesos.

Bloomberg’s electronic currency trading platform, FXGO, sponsored the event that attracted more than 100 currency strategists and FX market analysts and traders to the Westin Hotel on March 14.

Research contact: pamsnook@bloomberg.net

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