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USMCA Hopes Drive Peso And Loonie Higher

The Trump administration could finally get USCMA, also known as NAFTA 2.0 pushed through before end of the year. After some mixed wires from CNBC, the news out of DC is that House Democrats and the Trump administration have reached a handshake agreement on USMCA and that a possible vote could occur on December 18th.

A ratification of Trump’s rewrite of the trade deal with Mexico and Canada could be a key catalyst in resolving some certainty for business going into next year. The US is still using the current NAFTA agreement and we will see this new deal only provide some incremental changes. Both sides of the aisle are hopeful that this deal will get done even as the President is going through impeachment proceedings. If this deal gets done over the next couple weeks, it will remove a key market uncertainty and can provide the Mexican peso with significant upside expectations. Emerging market currencies could also have some follow through gains on this optimism over the USMCA trade deal.

The loonie also rallied today, but its gains will be limited as downside risks firmly remain in place for the Canadian economy.

Trump is hoping to have a strong finish to the year and he could deliver it with a USMCA trade deal and a major de-escalation with the US-China trade war.

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