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Volatility and panic in the currency market after Trump’s Election Triumph


By: Alejandro Díaz-Bautista, PhD in Economics.

Trump’s victory is considered an earthquake for the Mexican economy and collapses the peso.

The dollar surpassed the barrier of 20 pesos per dollar and suffered the biggest intraday fall in history. The Triumph of Trump brings the Mexican currency to a new historical minimum: more than 20 pesos for every dollar. The Mexican peso fell by 13%, on the night of the United States election.

The domestic currency collapses against the dollar to its all-time low, while US stock futures and European and Asian stocks are also down. “The analysis tells us there is volatility in the currency and financial markets with the arrival of Trump to the presidency of the United States. Macroeconomic fundamentals are solid in Mexico, but fiscal and monetary policy adjustments and an economic contingency plan are needed in the face of US election results,” warned Dr. Alejandro Díaz Bautista, an economist, professor and researcher-professor at El Colef, in addition to being a national researcher at Conacyt.

Trump’s campaign proposals, the new president-elect of the United States, began to take effect as soon as his electoral victory was declared. Trump’s main proposals include renegotiating the North American Free Trade Agreement (NAFTA), seizing the remittances that Mexicans in the United States send to their families, deporting 11 million undocumented immigrants, and building a wall border on the border of Mexico and the United States.

The spot dollar reaches more than 20 pesos after the first election results in the United States.

The Mexican peso collapses in its international negotiations, struck by the volatility of the first election results in the United States with a Trump victory. The dollar was quoted at a maximum of 20.73 pesos while the Republican candidate’s triumph in the United States elections was announced.

The behavior of the peso against the dollar is a result of the nervousness caused by anti-trade and anti-immigrant policies supported by Trump.

Trump has stated that the North American Free Trade Agreement (NAFTA) could be terminated, that he will build a wall on the Mexico United States border, and block the sending of remittances from Mexican immigrants in U.S.

In the medium term, the effects of Trump’s victory in Mexico may lead to a contraction of 2 to 3 percent of the Mexican economy. Similarly, the triumph of Donald Trump could lead the Mexican currency to a depreciation of up to 25 pesos for every dollar.

I do not believe that a scenario of Trump’s triumph in the elections has been seriously considered in recent days by the market and by the government. Let us hope that there are some economic contingency plans by the authorities and that they can take measures to protect the economy.

Dr. Alejandro Díaz-Bautista received his Ph.D. in Economics from the University of California, Irvine (UCI). He also earned his Master’s degree in Economics at the University of California. He was also educated at ITAM in Mexico City where he earned his Bachelor’s degree in Economics. His career has involved academics, government service and consulting for private firms.

Dr. Díaz-Bautista has also been General Director of Energy Planning at the Ministry of Energy. Previously, he worked with the Energy Regulatory Commission.

In the private sector, he has also worked for 20 years as an energy economist and economic consultant for private firms. He has consulted for two of the top five petroleum companies in the world.

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