Key Takeaways:

• 💰 Mexico’s peso reached its weakest level in over two years following Trump’s win in the U.S. presidential election
• 📉 Peso fell over 3% against the dollar to 20.8100, biggest loss since Mexico’s previous election
• 🌍 Emerging market currencies broadly weakened against a soaring dollar
• 🇲🇽 Tariffs and trade barriers under a Trump presidency could impact Mexico negatively
• 💸 Mexico’s currency has weakened over 17% this year, among the worst performing emerging market currencies
• 🏦 Central banks in emerging markets might intervene in dysfunctional markets
• 🌐 Immigration from Mexico to the U.S. and remittances could be problematic under Trump’s presidency
• 📊 Outcome of the election could lead to deeper volatility
• 💸 Emerging markets were negatively impacted by the resurgence of the "Trump trade" with the dollar and US yields rising.
• 📉 Mexico experienced a significant currency meltdown, with the peso dropping 3.5%, along with other Eastern European and South African currencies.
• 💵 Trump’s trade policies are fueling expectations of higher US borrowing costs and a stronger US dollar, reducing the appeal of risk assets in emerging markets.
• 📦 The emerging-market currency gauge had its worst day since February 2023 as traders reacted to Trump’s signals of expansive fiscal policies and harsher tariffs.
• 🌍 The widespread currency selloff and uncertainty surrounding Trump’s policies have created challenges for emerging markets, especially in Europe, Asia, and South Africa.

Impact of Trump’s Election on Mexican Peso and Emerging Markets

The aftermath of the U.S. presidential election in which Donald Trump emerged as the winner had significant implications for the Mexican peso and other emerging market currencies. Mexico’s peso experienced a sharp decline, reaching its weakest level in over two years, as investors reacted to the uncertainties surrounding Trump’s policies on tariffs and trade barriers. This led to a broader weakening of emerging market currencies against a soaring dollar, fuelled by expectations of higher U.S. borrowing costs and a stronger dollar under a Trump presidency. Traders prepared for more fluctuations as vote counts came in, anticipating deeper volatility in the currency markets.

The emergence of the "Trump trade" further impacted emerging markets, with the currency gauge experiencing its worst day since February 2023. The resurgence of market jitters was exacerbated by concerns over controversial judicial reforms in Mexico, as U.S. officials criticized these changes. The uncertainty surrounding Trump’s expansive fiscal policies and harsher tariffs created challenges for emerging markets in Europe, Asia, and South Africa, leading to significant currency meltdowns in Mexico and other regions.

Overall, the election outcome and subsequent market reactions highlighted the interconnectedness of global currencies and the vulnerability of emerging markets to political events and policy shifts.