National Security & Defense

The Corner

The Strengthening of Mexico’s Peso Doesn’t Bode Well for Trump

The Mexican peso’s strength has a negative correlation with Donald Trump’s presidential campaign polls. Over the weekend, the peso jumped nearly 2 percent against the dollar; analysts have attributed it to the near-implosion of Trump’s campaign after a leaked audio recording revealed the presidential candidate making lewd comments about women. And while political pundits and polls provide conflicting conclusions about who won the second presidential debate, the peso indicator illustrates that Trump’s debate performance did not fare well — the peso has continued to strengthen over the course of Monday’s market exchanges.

Trump’s threat to renegotiate the North American Free Trade Agreement and build a wall along the U.S. southern border has cast uncertainty over U.S.-Mexico relations if he were to win in November. In a Bloomberg study, the majority of economists surveyed predicted that under a Trump presidency, the peso would weaken to approximately 21 to 23 against the dollar — today, the peso is at 18.88 against the dollar. Before Trump’s scandal this past weekend, the peso was well over 19 against the dollar, and it nearly reached 20 just two weeks ago as Trump’s poll numbers were competitive.

The strengthening of the peso indicates that investors are confident that Hillary Clinton will win in November. “Markets assume that the weekend’s events are lowering the odds of Trump winning the election,” Barclays’s global FX and rates strategist Andres Jaime said. And based on Monday’s market exchanges, Sunday night’s debate did little to alter the peso’s positive trend. Trump’s debate performance may have been well enough for supporters to believe that there is a high probability of him beating Clinton, but based on the peso indicator it seems as if the U.S.’s largest trading partner has reason to believe otherwise.

Austin Yack — Austin Yack is a William F. Buckley Fellow in Political Journalism at the National Review Institute and a University of California, Santa Barbara alumnus.

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