Mexico has recently announced that it will impose a 55% tax on imports from the United States as retaliation for the US government’s new tariffs on imported goods. But while this is happening, the United States dollar remains steady against the Mexican peso.
This is a “win-win” situation for the US and Mexico because the US gets to maintain its strong peso position as a part of trade and investment, while Mexico benefits from the appreciation of the Mexican peso. The US dollar is also positioned well to benefit the US economy in terms of investment and trade.
Mexico is in economic distress, but they can’t afford to let the United States do what it wants with its currency. This is a strategy to keep the dollar strong enough to control the import side of the trade and the export side of the trade, which Mexico needs to sustain its economy.
Another reason why the US dollar is maintaining a bullish stance is because of the fact that Mexico’s economy is not in a state that would have benefitted from a weakening dollar. Mexico’s trade and economy are also dependent on the United States.
More than ever, the US economy depends on trade with Mexico. In other words, the dollar is supporting the US economy and the rest of the world is helping the US to sustain their trade with Mexico.
If Mexico decides to follow through with their tariff proposal, then the US could lose the trade and investment relationships with both Canada and the United Kingdom, since those countries are two of the main sources of jobs for American workers. Also, the US can lose the relationships with its major trading partners in Europe and Japan.
However, if Mexico is forced to impose a tax on US imports, then the US dollar is likely to continue to strengthen and it is an excellent time to invest in commodities like oil and soybeans. Those commodities are at very low prices right now and are poised to increase in value over the next year.
Another factor that has played a big role in keeping the United States safe from the pressures of changing currencies and the weakening of the US dollar is the fact that the banks and financial markets are open in all currencies. That means that any currency fluctuations don’t affect anyone who is invested in the US dollar.
When you see the financial markets open in all the currencies, it makes sense that investors don’t have to change their investing strategies for stocks. They can simply take their money in the currencies they want to purchase, whether that is the Canadian dollar to the British pound, the Japanese yen, or the US dollar.
Again, the fact that the financial markets are open in all currencies makes sense because of the fact that these markets are considered to be one of the most liquid markets on the planet. For example, if you can invest in the Canadian dollar, it doesn’t matter if it goes up or down.
One other reason that the United States can maintain its bullish stance on the dollar is because it is important to remember that the US dollar is the reserve currency of the world. The US is also a stable economy, so everyone else has confidence in US.
If you take a look at the charts of the US dollar, you will see that it has been strengthening for quite some time. The only thing that might keep it from maintaining a bullish stance is if it starts to weaken again.