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Peso Falls due to Quarrel Between Trump and Peña Nieto over Wall

Peso Falls due to Quarrel Between Trump and Mexican President over Wall.

Last Thursday 26th January 2017, the Mexican peso took a fall in value against the US dollar after a squabble between the newly elected US president Donald Trump and Enrique Peña Nieto, the Mexican President. After Mexico’s President seemed less than prepared to pay for Trump’s desired border wall, Trump tweeted his anger on Thursday morning referring to a deficit in trade with Mexico of 60 billion dollars. He refers to job and company losses from the USA and suggests that the Mexican president should cancel the meeting if unwilling to pay for the wall. While this was meant to be a rhetorical call, this has lead to the President of Mexico calling Trump’s bluff. The meeting was meant to be held on 31st January.
After an address given by Peña Nieto on national Mexico television, which rejected the idea that Mexico would build the wall, Peña Nieto proceeded to cancel the meeting with Donald Trump the following Tuesday.

This defiance against Trump caused the peso to fall by 1.2% on Thursday morning to only 21.317 pesos per dollar. Despite the open-ended quarrel, the weekend saw the peso slowly climbing back according to currency news – Friday, Saturday, and Sunday saw the peso slowly gaining back its value to the dollar. By Monday morning, the Mexican peso had risen back 0.8%.

The fall of the peso is likely due to the bare-face defiance of the Mexican president and the public announcement on Twitter as he has continuously shown his disdain for the wall, repeatedly refusing that Mexico has to pay its construction. Therefore, it comes as little surprise that Peña Nieto would refuse to discuss the matter.

However, the retaliation of Trump’s administration was to threaten a 20% import tax on all goods entering from Mexico to the United States. This was compounded but Trump’s further tweet on Friday which accused Mexico of taking advantage of the US. Despite Trump’s accusations and anger, the peso seemed to gain grounding following this tweet. This was also not helped by the tirade of abuse toward Mexico which was fired to the media by Kellyanne Conway, the counselor to the White House.

Despite this, since this tweet and subsequent press release on Friday, Trump has had an hour-long phone call with the Mexican president. At a meeting with British Prime Minister, Trump stated to reports that it was a very good call’, confirming that he had a strong relationship with the Mexican President and that they would be renegotiating their bilateral agreements to help remedy any trade deficits that are already in place.

This news has helped to create stability in the financial market regarding the two countries and has diverted a crisis between the two countries. This can be reflected in the steady climb of the peso by almost 6%. This has brought the peso back to 10.79 pesos to 1 US dollar.

In regards to further plans for the wall, both presidents are aware of their opposing views. No doubt the further negotiations on the topic will ultimately affect the value of the peso. Equally, the final decision on the wall, compounded with possible changes to trade agreements may cause a further decline in the peso.

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