2.07 - Mexican elections gave us a lot to worry about
- by Anna K.
Foregone elections in Mexico gave us both hope and scare.
In today’s world equities and policies are joined together like something that can’t be broken apart. The two worlds merged and there is nothing in sight that can’t break them. Especially with that many occasions that prove the bond of the two worlds. For example, today there is Mexican election and related to it Mexican peso which happens to be the most traded currency of the Latin America. Today peso is really low as the results of the Mexican election are likely to show the win of Andres Manuel Lopez Obrador.
Together with peso there are a lot of other options and instrument that Mexico can offer to the trade world. There are a lot of Mexican shares and bonds in Asian and European markets. But why are we so focused on election in Mexico? Andres Manuel Lopez Obrador belongs to the left wing. He promises to take care of corruption, violence and inequality in Mexico. He also promised not to turn into a dictator and find a way to deal with Trump. He promised not to raise taxes and somehow double the pensions for the elderly.
But our concern lies in the future of relations of Mexico and the US. The 63-year-old Obrador claimed that he would try and make Trump see reason. And that may not just be the best idea for the country. There is a lot of strain on the relations between two neighbors. And putting even more pressure may cause Mexican economy to erupt. As any country it has international debt that has to be controlled and put out somehow. And people will try and confront Trump if he goes for the full destruction of Mexico, which he openly despises. The best example for the future of US and dollar may be modern Russia. Until the open aggression of the country, investors were drawn to it and the economy was striving, but after the damage was done, national currency fell by 50 percent and hasn’t recovered to this day.
Of course, American economy is much stronger than Russian ever was, but lack of investors with external debt as big as it is. Open confrontation has never brought good to the countries. If the new Mexican president can’t find a way to talk to Trump the consequence will be hurtful to both sides of the conflict. But the world is more susceptible to the dollar movements than to anything else… well, maybe oil. We understand that it would be better for everyone if the two presidents could create some sort of friendship between the two countries, but as traders we hope that it would happen in the nearest future because we need some stability for successful trading.
Trading has always been an interesting and rather unstable world. But never was it as chaotic as today. With multiple war conflicts and political interests colliding it seems that the world will never be stable again. Just look at it. America that has the biggest economy in the world has a president who seems to support Russian aggression in the world and who wants to tear trading ties with the whole world. Russia, who used to be one of the biggest of oil and natural gas in the world is leading several uncalled-for wars around Eurasia. OPEC countries try to stabilize the prices for the black gold all-the-while raising the output for the crude. China prepares answers to America and so on. We could go on with the list forever, but the question still stands – will trading ever be more stable?
We ask this question after taking a look at today’s markets. Virtually everything is falling. Only dollar proudly stands as the winner of the situation with 0.3 percent gain. So, there you go – a stable asset for the future several days. But we have to ruin all of the illusion – after Mexican elections dollar is going to look at Trump’s actions. We would say that today’s growth is due to the fact that Trump greeted Obrador and markets saw the good intentions that may be on the way. But in case the rivalry lives on, dollar is not going to stand high for too long.
Russian-American summit is also something to look out for. It is going to take place in Helsinki on July 16 and markets are likely to freeze before it. Oil prices may easily drop anticipating the meeting and ruble can get stronger, hoping for the perfect for Russia outcome of the meeting. There is also the chance that investors are going to put more faith in the Russian economy if the meeting goes accordingly to Russian hopes. So, there is uprising in the Russian ruble that we can look out for.
There is also precious metals market that has been falling for weeks and weeks in a row. With occasional easing of the situation there has been no real relief for this segment of the market. We know that gold is very tied to dollar and the greenback has been climbing to the new heights lately which didn’t do any good for gold or it counterparts in the metals market. What could improve the situation? We would say faith of traders in the asset and weak dollar. And the first one is impossible without the latter. Until it is pushed down by the greenback it is impossible for gold to be stronger.
So, as it has been for a long time international policy of Trump is going to decide the fate of the markets for the nearest future. And we wouldn’t count too much on the American president as he clearly cares only about the fate of his own country without thinking about the ties and obligation he has to the rest of the world.