RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

It’s safe to say everyone is talking about “The Trump Effect” on the economy. Everything from his effect on trade to immigration has been discussed on every media outlet since January 20th. The March Mexican peso, thanks mostly to a the newly elected President Trump, has been crushed under the uncertainty of Trump’s policies on Mexico; that is until recently. The peso came down 20% after the election, but after the January 20th swearing in of President Trump, the peso has actually strengthened 7% to 20.49 pesos per USD since the inauguration. Right now, 1 USD is equal to a little over 20 Mexican pesos. Some currency trading firms are talking about how the performance could mean the peso strengthens to just 19 pesos/1 USD. That would be an almost 8% increase from this level, notable for any currency. Keep in mind a stronger peso, makes US exports more competitive against Mexico exports. This is something that is good for the US economy. In the short term, the March peso has seen a run up to .04885, and right up against the 100 day moving average. It’s highly overbought, and at levels we have not seen since December 12th. Is there an opportunity over the next few weeks to take advantage of this run up? I believe there is. Let’s look at some factors that could affect the price of the peso over the next month or so. The border tax and the NAFTA trade policies were roughly 70-80% priced by the time Trump was elected. Most would say that a 20% tariff on all Mexican imports could have been bigger, say 30%, or even 35%, and was largely discounted by traders. The post inauguration rally has told us this. In the end, Trump may be doing exactly what he said he would with his policies, but market perception is the main driver behind these moves and not newly enacted laws. Trump could find it hard to impose real meaningful impacts on Mexico without full congressional support. This opportunity to trade a currency doesn’t come along often. 


Peso Daily Chart

Joshua Graves

Josh began his career in May of 2013 after graduating from Purdue University, West Lafayette. He received a degree in Agricultural Economics, with a Certificate in Entrepreneurship. He started at Paragon Investments in Kansas, the heart of wheat country. While working there he developed long term relationships with corn, soybean, and wheat producers, speaking with them on a weekly basis. His goal was to market their physical production more effectively through tracking basis, as well as hedge their exposure in the grain and cattle markets through a variety of futures and option strategies. He then moved to Florida to work for PFL Petroleum, a physical biofuels brokerage, and gained significant exposure to OTC and physical energy markets. Trading has been a passion from day one of his career. In his free time he stays active in downtown Chicago, attends sporting events, and holds an FAA Private Pilot’s License and flies Cirrus and Cessna aircraft regularly.