Stunned Mexico ponders new relationship with US

A street vendor hawks a newspaper emblazoned with an image of Donald Trump with a clown’s nose, and a headline that reads in Spanish: “We’re screwed!”, in front of the Angel of Independence monument, in Mexico City, Wednesday, . “Trump is a huge leap into the unknown”, she told AFP.

“As I turn on the trading screens this morning the markets have seemed to calm a bit”, said Chris Gaffney, president of EverBank World Markets.

The Mexican peso recouped some losses after falling to a record low.

“The much-feared election of Donald Trump didn’t cause the one-way negative reaction in markets many expected”, CMC Markets analyst Jasper Lawler said.

After sharp declines in US stock futures overnight, equity investor panic eased but bond investors pushed up Treasury yields as they anxious Trump’s policies would ultimately weaken the dollar and hike inflation.

A move up on the chart indicates a stronger dollar and weaker peso.

“This is risk off”.

Trump won the key Florida race, and OH, while Clinton won Virginia. The peso recovered from its low after Trump took a measured tone in his victory speech and did not invoke any of his threats against Mexico, analysts said. In addition to hiking tariffs on its exports to the United States, Trump has made building a wall along the Mexican border a hallmark of his campaign. He was referring to races in MI and Wisconsin, where the results were still too close to call. President Vladimir Putin expects Trump to drop sanctions against Russian Federation for its invasion of Crimea, already this morning saying he ready to fully restore relations between Russian Federation and the US.

“U.S. yields were part of the reason for the dollar’s rise, but there was also a lot of “buy the rumour, sell the fact” and unwinding of the ‘Trump trade, ‘ after it played out, and a return to fundamentals”, said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities in Tokyo. The loonie dropped to its lowest since March and the peso, seen as the currency most vulnerable to Trump’s protectionist policies, hit its lowest level in history. The euro fell around 0.87 percent versus the dollar, holding around $1.092. A Nevada court on Tuesday afternoon rejected the suit, in which the GOP candidate claimed earlier in the day that some early voters were improperly allowed to vote.

“We both agreed that we must work for a relationship of trust, of a shared future, because our countries are very important to each other”, he said. It gained support from the US equity turnaround as well as from the yield spreads, said Kathy Lien, managing director at BK Asset Management in NY.

Concerns of a Trump victory weighed heavily on the Peso for months on his threats to rip up a free trade agreement with Mexico and tax money sent home by migrants to pay for building a wall on the southern USA border.

After the election, Mexico’s currency fell 7.18 per cent to 20.20 pesos per USA dollar, while the Mexican stock market tumbled 2.2 per cent.

“That may appear unlikely at first sight”. But a Trump victory could make a rate hike less likely – especially if financial markets remain under pressure.

The euro EUR= fell to $1.0920, its lowest against the greenback since October 28. Sean Callow, a forex strategist at Westpac described Asian markets tumbling as a response to election forecasts “as though the four horsemen of the apocalypse just rode out of Trump Tower”. A revelation from James Comey, director of the Federal Bureau of Investigation, that his agency is looking at new emails associated with Clinton increased concerns that Trump could win the election instead.

Bloomberg further reported that analysts with the financial services group Nomura Holdings Inc. and Capital Economics now say that in the aftermath of the Republican’s victory, the peso could drop as low as $25 USA dollars per peso. Wellington plunged 2.8 percent while there were also losses of more than two percent for Taipei.