Mexican Peso Weakens Despite Nearing Repeal of US Steel Tariffs

The  Mexican peso is weakening against several major currencies toward the  end of  the  trading week. Despite senior officials claiming that they are close to  striking a  deal that would see the  US repeal its tariffs on  steel and  aluminum from Mexico, the  peso was unable to  take advantage. This could show that traders are more concerned about its fledgling economy and  the  political turmoil that has unfolded only months after President Andres Manuel Lopez Obrador took office.

Last year, President Donald Trump imposed steel and  aluminum tariffs on  many trading partners, including Canada and  Mexico. After a  year of  negotiations, the  three countries established the  United States-Mexico-Canada Agreement (USMCA), though the  trade agreement has yet to  be ratified.
Following a  meeting with her Canadian counterpart in  Toronto, Mexican Economy Minister Graciela Marquez revealed to  the  CBC that they are “close to  negotiating the  lifting of  the  tariffs.” She added that “we’re having very fruitful conversations on  lifting the  tariffs not only in  the  US but also here in  Toronto.”
Her Canadian counterparts are meeting with US trade representatives in  Washington this week.
But even if Mexican leaders are successful in  their negotiations with their US counterparts, Congress still needs to  ratify the  agreement. Democrats in  Congress have confirmed they will not ratify the  USMCA unless Mexico delivers on  a  pledge to  institute a  series of  stronger labor laws. To  Mexico’s credit, lawmakers recently approved legislation that boosts the  rights of  trade unions.
Republicans, meanwhile, say they will only support the  USMCA when the  White House drops the  tariffs. Senator Chuck Grassley (R-IA), the  chair of  the  Senate Finance Committee, told reporters last month that there would be little chance of  approving the  trade pact if the  steel and  aluminum levies stayed in  place.
On  Thursday, the  Bank of  Mexico will announce its move on  interest rates. The  market is forecasting that the  central bank will leave rates unchanged at  a  decade high of  8.25%. However, experts say that the  central bank will eventually cut rates by  the  end of  the  year to  spur economic growth.
The USD/MXN currency pair rose 0.18% to 19.0870, from an opening of 19.0522, at 16:37 GMT on Thursday. The CAD/MXN edged up 0.16% to 14.2000, from an opening of 14.1770.

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