Weekly Asset Heatmap

Weekly Asset Heatmap: North America

As NAFTA talks resume this week, our predictive signals indicate big moves may be forthcoming in North American currencies -- particularly, a rising risk the peso could soon depreciate. Coupled with still-elevated concern over protectionism in Canada and Mexico, the signals suggest observers are bearish on the prospects for renegotiation.

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A rise in our Federal Reserve, Banxico, and BoC signals suggest big moves in North American currencies within the next month.

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Salient threads in the digital debate driving this movement include:
  • Ahead of the fourth round of NAFTA renegotiations, set for October 11-15 in Washington D.C., the Wall Street Journal reported that lead U.S. trade negotiator Robert Lighthizer would propose upending a core principle of NAFTA by requiring auto-industry national content standards, a proposal the U.S. Chamber of Commerce and industry groups strongly oppose and say could kill the talks.
  • The Mexico Institute, a reputable binational think tank, published an article in Forbes challenging U.S. Commerce Secretary Wilbur Ross' conclusion that NAFTA rules were killing American jobs.
  • With the future of NAFTA in the balance, debate is growing in Mexico over the country's need for a strategy to increase internal competition and productivity.
  • Canadian aircraft maker Bombardier, Inc. continues to protest the high tariffs applied to it by the Trump Administration in part by arguing the new duties will harm American suppliers that produce parts for Bombardier's CSeries commercial jets.
  • According to a Pew Research survey, views of NAFTA are less positive and more partisan in the United States than in Canada and in Mexico.

Our USD/MXN signals suggest the risk of an upward shift is rising. Still, the risk level is far below where it was before the U.S. election, Trump's inauguration, and in late February.

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Online conversation activity reflecting concern over NAFTA and protectionism among Mexicans and Canadians remains elevated and has risen in recent weeks.

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