The US presidential election is in full swing, and the ‘Trump trade’ is making waves in the global markets. The Republican candidate’s potential win has sent shockwaves across the globe, with the Mexican peso (MXN) taking a significant hit against the US dollar (USD). As we delve into the implications of a Trump presidency on the economy, we’ll explore how this may impact the value of bitcoin (BTC), gold, and the global markets.
The ‘Trump Trade’ in Full Swing
Donald Trump’s presidential campaign has been marked by his protectionist policies, which have sparked fears among investors. His vow to impose tariffs on Mexico, one of the US’s largest trading partners, has sent the Mexican peso plummeting against the USD. The Latin American currency has declined by 27% since March, with most losses stemming from concerns that a potential Trump administration would resort to protectionist policies.
As Trump takes a notable lead over Kamala Harris in the presidential race, the ‘Trump trade’ is gaining momentum. This phenomenon involves bullish bets on bitcoin (BTC), the dollar index (DXY), and higher Treasury yields, alongside lower Mexican peso values. The result? A surge in the value of BTC/MXN pairs.
Bitcoin Soars to Record Highs
The leading cryptocurrency by market value has surged over 7% during Wednesday’s Asian trading hours, setting record highs above $74,000. This upward momentum can be attributed to several factors:
- The potential imposition of tariffs on Mexico could lead to higher inflation and reduced economic growth.
- Trump’s vow to renegotiate the US-Mexico-Canada Agreement (USMCA) has sparked concerns among investors.
- As a safe-haven asset, bitcoin is often seen as a hedge against inflation and economic uncertainty.
The cryptocurrency saw bigger gains in Mexican peso (MXN) terms, with the pair on Binance trading nearly 10% higher at 1.548 million, according to data source TradingView.
Mexican Peso Tumbles Against USD
As the MXN declined by 3% against the USD to 20.7080, it reached its lowest value since August 2022. The Latin American currency has been battered by fears of a potential Trump presidency and protectionist policies. This downward trend is likely to continue if Trump’s tariffs plans are implemented.
Gold Trades Flat as DXY and Yields Rise
Despite the uncertainty surrounding Trump’s tariff plan, gold traded largely unchanged at nearly $2,740 per ounce. Several factors contributed to this stability:
- Gains in the dollar index (DXY) topped 105.00 for the first time since July 9.
- The yield on the 10-year Treasury note jumped over 20 basis points to 4.46%, reducing the appeal of gold as a safe-haven asset.
The uptick in bond yields could be attributed to fears that Trump tariffs would complicate the Fed’s plans to cut borrowing costs. Tariffs are known to create inflationary pressures by increasing goods’ costs, disrupting international trade, and reducing competition.
Bitcoin and Gold on a Bullish Trajectory
Both bitcoin (BTC) and gold are said to be on a long-term bullish trajectory courtesy of the ballooning US fiscal debt. Bitcoin has surged 75% this year, outshining the S&P 500’s 21% gain by a significant margin. As digital gold, BTC is often seen as a hedge against inflation and economic uncertainty.
Conclusion
The ‘Trump trade’ is in full swing, with bullish bets on bitcoin (BTC), the dollar index (DXY), and higher Treasury yields, alongside lower Mexican peso values. The potential imposition of tariffs on Mexico has sent shockwaves across the global markets, leading to a surge in BTC/MXN pairs. As investors await the outcome of the US presidential election, one thing is clear: the impact of Trump’s protectionist policies will be far-reaching and significant.
References
- Washington Post: "Trump vows to impose 25% tariff on Mexican goods if country doesn’t stop ‘onslaught’ of immigrants"
- Associated Press: "US Presidential Election Results"
- Brookings Institution: "Robin Brooks on Twitter"
