Mexico's central bank head is resigning next year

Mexico’s central bank head Agustin Carstens will resign in July 2017 to lead the Bank for International Settlements, according to Reuters.

His resignation comes at time of potential economic challenges in Mexico following the election of President-elect Donald Trump, who has maintained an anti-trade position (and, more specifically, anti-NAFTA) throughout his campaign.

This announcement follows a tumultuous few weeks for the Mexican peso, which has been one of the big market casualties of the US presidential election. 

The currency fell to a record low against the dollar on election night as rolling results increasingly pointed to a victory by Trump.

In the last few months leading up the election, the peso became something of a gauge of Trump’s prospects. When traders thought Trump’s prospects of winning went up, the peso often went down against the US dollar – and vice versa.

Analysts and economists had attributed the currency’s volatile moves to the fact that Trump’s strong protectionist platform would most likely have negative repercussions for the Mexican economy if they were implemented.

However, it’s worth noting that although the peso’s more recent moves could be linked to Trump’s performance, it’s not all about him.

Neil Shearing, Capital Economics’ chief emerging-markets economist, previously noted that “since January 2015, the peso has weakened by more than any other major EM currency. So while Trump may have weighed on the peso at the margin, this isn’t the whole story.”

Rather, he suggested, the floundering currency can be more explained by a structural deterioration in the country’s economic position amid long-run issues at Pemex, the state-owned oil company, and chronically weak productivity growth.

In any case, the Mexican central bank, nicknamed Banxico, hiked rates by 50 basis points to 5.25% —  the highest rate since 2009 —  up from 4.75% in their first meeting since the US election.

“In the weeks after the last monetary-policy decision, the panorama for the global economy became more complex, among other factors, as a consequence of the electoral process carried out in the United States and its result,” Banxico wrote in the accompanying statement.

“Although the global economy had given indications of a moderate recovery in the third quarter of the year, the possible implementation in the United States and other countries of some measures to hinder external commerce and foreign exchange, makes the balance of risks to the growth of the global economy [deteriorated].”

The Mexican peso is down by 1.0% at 20.7591 per dollar as of 11:46 a.m. ET.

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