The Canadian dollar and Mexican peso are getting whacked following a Reuters report suggesting Canada is convinced President Donald Trump will pull the US out of the North American Free Trade Agreement.
The Canadian dollar trades down 0.91% at 1.2575 per dollar.
The Mexican peso is down 0.85% at 19.4034 per dollar.
Bank of America Merrill Lynch’s Carlos Capistran and Ethan Harris say the decision to withdraw from NAFTA wouldn’t solve Trump’s issues with the deal, which include the US trade deficit with other countries and the loss of manufacturing jobs.
“Most economists agree that trade deficits are the result of saving and investment decisions rather than trade agreements,” Capistran and Harris said in an October note. “In particular, trade deficits are financed by net capital inflows. Capital flows into the US are strong because of low private savings and large budget deficits in the US and elevated savings in China and other EM economies.”
The duo also shared a chart showing that American manufacturing jobs have seen a decline similar to those in other developed countries amid improvements in technology.