Mexican Peso Set to Rise, Say Credit Suisse, Who Revise up Their Forecasts

Strategists at Credit Suisse have revised up their targets for the Peso versus the dollar as a result of easing political risks in the US after Donald Trump’s chances of reaching the White House have fallen to only 17%.

The Mexican Peso has recovered and is set to go higher versus the Dollar according to strategists at Credit Suisse.

Donald Trump’s poor performance in televised debates and a tape released of him talking in a derogatory way about women (in which he admits amongst other things of trying to seduce a married woman by taking her furniture shopping) have lowered his chances of reaching the white house to only 17%, according to Credit Suisse’s Strategist, Alvise Marino.

This, in turn, is expected to support the peso as well as potentially weigh on the dollar.

The peso weakened when Trump was doing well in the polls as his anti-trade agenda was expected to hurt neighbours like Mexico the most.

The tougher border control and Trump’s now infamous Mexican ‘wall’ were concrete representations of this negative, protectionist trade view.

Such policies would hamper trade by imposing import tariffs to advantage American-made goods.

This would be negative for Mexican exports which rely heavily on the US market and would be expected to push the peso lower.

There is also an argument that Trump’s protectionist agenda would actually strengthen the dollar as it would help to rebalance the trade deficit by advantaging export growth over imports.

The widening lead opened up by Hillary Clinton in the race to the White House, however, now means it is highly unlikely these things will come to pass, and the resulting recalibration should support a rebound in Mexico.

The current USD/MXN exchange rate is 18.9850 but Marino expects it to fall to 18.00 in three months from 20.00 previously, and from 19.50 in 12 months to 19.00.

“This new forecast profile takes into consideration the possibility that the peso might temporarily overshoot our forecast in the now more likely event of a Clinton victory,” comments Marino.

Possible risks to the forecast include a Trump rebound in the last remaining days of the election as well as a fall in global risk appetite and Fed hiking interest rates – both of which would weigh on the Peso.