Much fanfare is made about the impact on Mexico every time a new poll shows resilience for a Trump Presidency, and then the Mexican peso goes the other direction (and just because Bloomberg has a chart suggesting otherwise, doesn’t mean it’s real). It’s a classic case of media hype when the narrative suits but when the nanosecond correlation breaks down, we get silence. So, here it is: there is zero meaningful correlation between Trump and the Mexican peso (ok, fine, maybe not zero but de minmis). We are not saying there haven’t been and won’t be knee-jerk reactions. What we are saying is that the best way to understand long term impacts on the Mexican peso appears to be the JPYUSD. We look at a 5yr daily correlation (using a 252 period) and it’s pretty clear that when the JPY rallies against the USD, the peso gets a boost. Conversely, when JPYUSD destabilizes, the peso suffers. That’s it in a nutshell. The reasons why can be debated for sure but our view increasingly sees the rise of peso liquidity as the main causal factor than anything else. Free market capitalism cuts both ways and Mexico’s increased reliance on internal consumption, in large part, means that the central bank can manage periods of FX stress through smart monetary measures. Note: Mexico’s central bank in a surprise move this month, bumped the overnight rate 50bps. Second note: That Mexico can raise rates seems to have gotten little or no press.