Weekend Update: Fiscal Cliff Weighs Heavily on Markets

Mexico missed on GDP last Friday, growing at a 3.3 percent YoY basis for the third quarter for 2012, slightly below analysts expectations.  Markets didn't care though, and the Peso closed up nearly 1000 pips from the 13.25-29 lows, ending the trading day in New York at 13.15.   Press conferences held by US congressional leaders had an upbeat and optimistic tone about an early resolution to the fiscal cliff.  The news buoyed the Peso, which sells eighty percent of its exports to the US.  The fundamental story in Mexico is still positive, despite this recent miss.  The events of Friday make it clear that the fate of the Peso, as long as Mexico is stable, is tied to external factors like Europe and the US budget talks, and not internal factors like Mexico's growth rate.  I remain cautiously optimistic, for now.