• The Mexican Peso trades flat on Wednesday but an escalation in rhetoric between US and Mexican leaders poses risks. 
• Mexico’s President Sheinbaum reads out a letter on television warning Trump she’ll retaliate with tit-for-tat tariffs if he starts. 
• Technically, USD/MXN remains at the top of a mini range as it consolidates within a broader uptrend.

The Mexican Peso (MXN) trades flat as one of the country’s trademark tortillas on Wednesday after closing on average over 1.5% lower on Tuesday, however, markets remain tense as the rhetoric ramps up between the two countries’ leaders.

The previous day’s decline was caused by President-elect Donald Trump’s threat to tear up the US, Mexico and Canada free trade agreement (USMCA), and whack a 25% tariff on imports from both countries, unless they tightened their borders with the US and put an end to illegal immigration and narcotics trafficking. 

This led to a broad depreciation of the MXN and the CAD on fears tariffs would result in lower exports and reduced demand for the FX to purchase them.