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US Dollar Strenghtens Amid Trade Tensions: Trump's Tariffs Threat Weakens LATAM's Main Currencies

November 26, 2024 (Investorideas.com Newswire) Investorideas.com, a go-to platform for big investing ideas releases market commentary from Quasar Elizundia, Expert Research Strategist at Pepperstone.

"The US dollar experienced a significant increase following recent comments from President-elect Donald Trump, who reaffirmed his intention to impose 25% tariffs on products from Mexico and Canada, as well as 10% on Chinese imports. These statements initially strengthened the dollar, with the DXY index climbing to 107.5 before retreating to around 107. In particular, the Mexican peso has been one of the most affected instruments, falling by over 1% during the session against the US dollar, reflecting the currency's vulnerability to trade tensions with its main trading partner.

Trump's protectionist rhetoric has raised concerns about a potential escalation in trade wars, which could lead to an environment of greater volatility for global markets. Notably, this announcement has reignited worries about the potential inflationary impact. This has put traders in a cautious mode, especially with the upcoming FOMC minutes, which may provide greater clarity on the Federal Reserve's monetary policy direction in this new environment of heightened volatility and uncertainty.

The Colombian peso has also felt the effects of trade tensions, albeit less severely than the Mexican peso. The COP's depreciation, down by 0.7%, reflects concerns about how US protectionism could impact Colombian exports to the United States. In contrast, the Chilean peso has shown greater resilience due to its diversified export base. However, Chile remains vulnerable to a potential decline in global demand for commodities, which could negatively affect its currency.

Amid a context of growing uncertainty, Latin American currencies face significant pressures, and Trump's tariff policies could deepen volatility in the region. With the PCE inflation data set to be released this week, markets will be closely monitoring any signals that could shift expectations for the US economic outlook and monetary policy."

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