Post-Election Currency Outlook

Following Trump's election win, we've observed a nuanced response in the FX markets. Widening interest differentials are currently shaping spot performance more than trade-specific exposures, with majors like the British pound, offshore Chinese renminbi, Swiss franc, Japanese yen, and euro down by 1.5-2%.

The Mexican peso, especially vulnerable to potential immigration and trade changes, was over 3% lower yesterday. While the Canadian dollar has slipped slightly, its outlook remains cautiously optimistic. Canada’s yield curve and defensive positioning have provided some buffer. In Q1 next year, CAD has room to appreciate, especially if critical economic indicators point to a turnaround.

As the market prepares for possible policy shifts in 2025, it’s noteworthy that Trump’s approach to existing trade deals, like USMCA (The United States-Mexico-Canada Agreement), remains uncertain. He’s been unpredictable in the past, so substantial changes aren’t guaranteed—but some friction could arise.

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