Mexican Peso Rallies on US-Mexico Trade Agreement

The Mexican peso is rallying against its American counterpart on Monday after officials announced a new US-Mexico trade agreement that would scrap the North American Free Trade Agreement (NAFTA) name because of â€œbad connotations.” The two nations will now wait to see if Canada will agree to a bilateral pact with Washington.

After months of tough negotiations, the US and Mexico reached a deal that they say will benefit farmers and manufacturers on both sides of the border. The new deal will last 16 years and mandate a review every six years, which is something similar that Canadian Prime Minister Justin Trudeau objected to in the spring because he did not like the idea of a five-year sunset clause. The pact will eliminate a cap on imports of light vehicles from Mexico, stipulate a certain amount of North American aluminum and steel consumption, and boost purchases of US agriculture.
It will now require congressional approval with a 90-day window.
President Donald Trump called it “a big day for trade”:

It’s a big day for trade, a big day for our country.  A lot of people thought we’d never get here because we all negotiate tough.  We do, and so does Mexico.  And this is a tremendous thing.

This has to do — they used to call it NAFTA.  We’re going to call it the United States-Mexico Trade Agreement, and we’ll get rid of the name NAFTA.  It has a bad connotation because the United States was hurt very badly by NAFTA for many years.  And now it’s a really good deal for both countries, and we look very much forward to it.

US trade representatives will now concentrate on reaching a similar bilateral deal with Canada. President Trump said talks will resume and that a separate deal was possible, but it would depend on Ottawa, telling his Mexican counterpart:

It is our wish … that now Canada will also be able to be incorporated in all this.  And I assume that they going to carry out negotiations of the sensitive bilateral issues between Mexico — rather, between Canada and the United States.

The Mexican peso has had a difficult 2018 up to this point. At one point the currency neared 21.00 before gaining 8% against its US counterpart, though it has pared some of those gains in recent weeks.
The USD/MXN currency pair tumbled 0.77% to 18.7692, from an opening of 18.915, at 17:47 GMT on Monday. The USD/CAD fell 0.35% to 1.2981, from an opening of 1.3026.

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