From Goldman’s weekly forex outlook, on Mexico Canada and the US

US-Mexico-Canada Agreement (USMCA) is likely to have at least three FX impacts over the medium term

  • First, we think the new deal is a mild tailwind for MXN as a trilateral trade deal is more likely to be approved by the US Congress than a deal that excludes Canada. 
  • Second, our latest analysis of the impact of a new trade deal suggests that there may be further to run for CAD, especially given that data continue to support the case for a rate hike this month. 
  • Finally, we have found that, when the focus of US protectionism narrows, global risk assets can do well and the dollar can move weaker, even if US-China trade tensions escalate moderately. 

To be clear, the details of the new deal are not all good news: for example, it includes protections for Canada and Mexico against future US auto tariffs, which may foreshadow more US protectionism outside of North America. Still, the proposed USMCA agreement has taken some important tail risks off the table


ps. This is from a Friday note from GS but as its bigger picture implications posting it now


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