The U.S. dollar continues its bullish trend as the new Trump administration begins to take shape.
Recent appointments, such as Stephen Miller and Tom Homan, appear to reaffirm the intent of the former president and now president-elect to adopt effectively restrictive stances on immigration and trade policy.
Although Robert Lighthizer has not been officially confirmed, all indications point to him leading the possibilities for a key position, which could trigger a more aggressive trade stance globally.
This scenario has significant implications for Mexico, now the main trading partner of the United States. Trump has made clear his intent to implement measures to prevent manufacturing from moving to Mexico and to stop China from using Mexico as a gateway to bring its products into U.S. territory. This outlook has negatively affected the Mexican peso, which today weakens toward the 20.5 per dollar mark, a level that has proven to be an intermediate support point for the Mexican currency. Pressure on the MXN seems to persist, and I maintain my target of 22 pesos per dollar if current conditions continue.
Other Latin American currencies are also affected. The Colombian peso and the Chilean peso are facing pressures today, reflecting the impact of expectations regarding a more protectionist U.S. trade policy.
Looking forward, the next key catalyst for Latin American currencies could be the U.S. inflation data, where inflation is expected to show signs of acceleration, something that could add further pressure on LATAM FX.
These tensions and developments in U.S. policy keep the Mexican peso under pressure, and it is likely that the situation will not improve in the short term, especially if more aggressive protectionist policies are confirmed..”
