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13th/1/2017 The affair between Peso, Trump and Loonie

Happy New Year Traders,

Well its fair to say that we’ve started 2017 in the same vein as we left 2016 – fake news, childish behaviour, global rumpus and market volatility…..and that’s just from the supposed adults.

There are plenty of great tales to talk about at the moment but lets start with a simple, yet intriguing one. The adulterous relationship between the Mexican Peso, Donald Trump and the Canadian Dollar.

The Mexican Peso is the put-upon abused wife, Donald is the drunk redneck husband and the Canadian Dollar is the pretty new Mistress. Before you start thinking that I’ve lost the plot and consumed too much Port over the festive period, please bear with me (furthermore you can never have too much Port and I didn’t even get one glass of it at Christmas – the horror, the horror!)

I talked last year about the Mexican Peso being used as a proxy for the US election and now we’ve moved onto phase 2. Namely the effect that President-elect Trump is having on the Peso after his series of damaging tweets about Mexico. If we look at the chart below we can take a closer look.

You can see the huge move post the election back in November, hammering the rate through 20. However what we’ve seen in 2017 is that every time we see Trump take to twitter in some post-pub drunk twitter-rage incident where he lashes out at individuals, organisations and countries we are seeing an almost immediate response in the financial markets. As one of my colleagues said the other day – it’s now possible to move a global market in 140 characters or less – which is kind of intriguing, weird and worrisome all at the same time.

So Trumps negative comments on Twitter have been bad for the Peso. So much so that a tongue-in-cheek story was doing the rounds about Mexican traders advising the Mexican government to just buy twitter and shut it down! (Thanks to follower @drumhowan sending me the link, a few hours after we’d discussed these currencies.)

Interestingly though there’s another angle to this story – namely the response of the Canadian Dollar. Lets look at the back drop.

If you look at the second chart it shows the DXY US Dollar Index which was on a tear against all the major currencies – apart from the Canadian Dollar which held up well against the USD.

In fact if you look at the US Dollar Index it almost looks like its ready to roll over – especially after Trumps news announcement the other day. Lets keep an eye on that.

Furthermore what we’ve seen is as Trumps Twitter comments have hurt the Mexican Peso, they have helped the Loonie. Now admittedly there has been some help for CAD from a stable Oil price. And yet its almost as if the more negative tweets he makes – the more money gets shifted from Peso and USD into Canada – perhaps Meryl Streep and all her luvvie liberal elite friends truly are leaving the country and heading north of the border? What do you think readers?

November 2016

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