Mexican Peso Weakens on Trump Border Threat, Incoming Government

The Mexican peso weakened against its American counterpart at the end of the trading week. The peso tumbled after President Donald Trump threatened to close the US-Mexico border. The currency is also struggling to rally as the nation’s incoming leftist government will soon come to power.

Speaking to reporters on Thursday, President Trump said he is willing to shut down the entire US-Mexico Border and stop trade with the country should migrants from Central America enter the US illegally. To date, Trump has sent more than 5,000 troops to the area, calling the migrant presence an â€œinvasion.”

If we find that it gets to a level where we are going to lose control or where people are going to start getting hurt, we will close entry into the country for a period of time until we can get it under control.

The whole border. I mean the whole border. Mexico will not be able to sell their cars into the United States where they make so many cars.

He added that the US government could shut down in the coming weeks if Congress does not provide funding for the border wall.
Meanwhile, worried about inflation, the Mexican central bank raised interest rates by 25 basis points to a 10-year high of 8%. In November, inflation clocked in at 4.56%, down from 4.9% last month. This is still higher than the target rate of 3%.
Officials also conveyed “concerns regarding both the incoming administration’s policies and some legislative initiatives.” The Bank of Mexico believes that economic growth and the currency are under threat by President-Elect Andres Manuel Lopez Obrador and his MORENA party, which will come into power on December 1.
The very first bill that was drafted by the president-elect’s party was to cap bank fees. This, the market suggests, is a sign of things to come.
But the Mexican economy may get a boost in 2019 after it was reported that the US will soon lift steel and aluminum tariffs later this month when the new USMCA deal is signed. This trade agreement is expected to provide some certainty to Mexican business.
The USD/MXN currency pair rose 0.29% to 20.3707, from an opening of 20.3128, at 15:11 GMT on Friday. The CAD/MXN slipped 0.03% to 15.3960, from an opening of 15.3990.

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