Fletcher in the News

Mexican Peso Still Moves on Trump's Whim, But Less Than Before: Prof. Klein Weighs In

A year after Donald Trump's election to the White House, the Mexican peso rises and falls, in part, along with the tweets and threats of the 45th president.

The sincerity investors perceive in the president's threats to build a wall at the United States-Mexico border and withdraw from the North American Free Trade Agreement has affected the peso's movements since his surprise victory in 2016. The more worried Wall Street is he will act, the more the peso falls. And the more they think he's bluffing, the more it rises...

..."Mexico had two earthquakes in September, and growth was a little bit weaker in the third quarter than in the first part of the year," said Michael Klein, Tufts University economist and founder of economics website EconoFact in an interview.

Mexico's economy likely shrank for the first time in more than four years during the third quarter, according to a preliminary official estimate this week.

The peso still hasn't returned to inauguration-level lows, despite the president's continued insistence on a border wall and increasingly testy negotiations on NAFTA. That may be, in part, because investors simply aren't taking Trump as seriously as they used to.

"The thing with Trump is that markets move on news, but the news has to be credible," Klein, former chief economist in the office of International Affairs at the U.S. Treasury Department, said. "Because Trump's views on things are so volatile, it's hard to see how his tweets and announcements can have much of an effect."

Read the full article