The Mexican peso was pressured for the later part of the U.S. presidential election and throughout the first few months following President Donald Trump’s victory because of Trump’s promises during the campaign trail to build a wall across the southern border, crack down on immigration and renegotiate the North American Free Trade Agreement, which all contributed to risk-off sentiment concerning Mexican assets.
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However, speculation of a U.S.-Mexico trade war has diminished. Last month, the U.S. and Mexico reached an accord to end disputes over the sugar trade between the two countries. Moreover, the two, along with Canada, are expected to start talks over NAFTA next month.
Meanwhile, the Mexican economy has been doing better-than-expected in light of the threat of a trade war and a quickly depreciating currency. Mexico’s economy expanded 2.6% in the first quarter year-over-year.
“It’s not spectacular growth, but it’s better than people expected,” Alberto Ramos, head of Latin American Economics at Goldman Sachs, told CNBC. “Towards the end of last year, the consensus was the [Mexican] economy would decelerate a lot, with consensus around the 1 percent handle. Now the consensus has increased and is closer to 2 percent.”
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