Mumbai: One way of gauging who won the first US presidential debate is to look at the reaction of the financial markets. And since Mexico will perhaps be the biggest loser of a Donald Trump victory, what better indicator to watch than the USD-Mexican peso (MXN) rate? The behaviour of the USD-MXN rate after the debate clearly shows that financial markets think Hillary Clinton won easily. USD-MXN was at 19.8772 on 26 September, falling to 19.3994 on Tuesday, which means the Mexican peso appreciated against the US dollar, which indicates the odds of a Trump victory in the US elections went down.
The accompanying chart shows the USD-MXN rate since 1 May this year, together with the USD-INR rate, both rebased to 100. Note how the peso went down sharply and the USD-MXN rate went up, as it became increasingly clear that Trump would be nominated as the Republican candidate for the presidency, which he clinched at the end of June. The chart shows an intermediate peak on 27 June, as fears about Trump becoming president increased.
But there was always an undercurrent of hope that Clinton would beat him and that led to the peso going up and USD-MXN falling a bit, as the polls showed Trump losing ground. Since 6 September, however, the peso weakened again, shown by USD-MXN rising in the chart, as Trump closed in on his rival. But as the chart clearly shows, the peso appreciated and USD-MXN weakened again on Tuesday, indicating the markets believe Clinton trumped Trump in the presidential debate.
The other thing to note in the chart is the almost flat trajectory of the USD-INR rate and contrast it with the extreme nervousness of the Mexican peso.
It’s early days yet and there’s still over a month left for the US presidential elections. One way to tell who’s likely to win is to keep a sharp eye on the USD-MXN rate.