- This is a pair that I think will be front and center during the month of April, and it could be a bit of a surprise for most traders.
- Granted, it has been very noisy over the last several weeks, and the month of March has been a bit of a headache, but at the end of the day, the most important thing you need to know about in this market is whether or not tariffs are going to be levied on Mexico.
It appears that any terraces there levied on Mexico will probably be somewhat indirect, because Donald Trump has stopped talking about them. Mexico has helped out with the border, which is by far his biggest priority, so there is a fair shot that Mexican goods will not be tariffs, or if they are it will only be in a very limited fashion. All of this is good for the Mexican peso.
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However, on March 26, Donald Trump announced that there would be 25% tariffs levied on cars made outside of the United States. What most people don’t know is there is a sizable auto industry in Mexico that produces cars for American manufacturers. In other words, those cars will suddenly become much more expensive. If you were GM, what would you do here? The answer is simple, you bring more manufacturing back to the United States, which is exactly what Donald Trump wants to begin with. This means more pain for the Mexican economy, despite the fact that the tariff isn’t directly levied it Mexico.
What would be the final result here? I think we are going to continue to see a lot of sideways action here. At one point, and quite frankly just a few days ago, you could have convinced me that the Mexican peso was going to start strengthening because of a lack of tariffs. However, this has thrown yet another wildcard into the mix, so it’ll be interesting to see how this plays out. I believe at this point in time, the market doesn’t really know what to do with this information, so we probably stay in the same range we have been in for the last couple of months. This is defined by the 19.80 MXN level in the bottom, and the 21 MXN level on the top.
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