Donald Trump’s controversial presidency campaign has had an impact in the FX markets, most notably in the Mexican Peso and to a lesser extent on the Russian Ruble. While the RUB/MXN cross pair has been renamed by some as the ‘Trump Trade’, this is a very unusual cross which is hardly offered by the majority of brokers. However, those who wish to take advantage of the recent volatility in this lesser-offered currency pair can do so by creating a synthetic currency pair.
In essence, the process for doing this is to choose two pairs which contain a common currency (for example, the US dollar) against each of the two currencies which the trader seeks to trade. By taking opposing positions in the two markets the exposure to the common currency is cancelled out, leaving just the synthetic pair.
If we take the Trump Trade as an example, which has recently surged in popularity due to its sensitivity to US republican nominee Donald Trump’s performance in the polls, we explain how you could create a synthetic RUB/MXN using the far more liquid and widely-traded pairs of the USD/RUB and USD/MXN.
A long position in RUB/MXN would consist of a short in the USD/RUB, and a long in the USD/MXN:
Short position in: USD Short
RUB Long
You can short the USD and long the RUB:
Long position in: USD Long
MXN Short
In another trade, you can go long on the USD and short on the MXN, resulting in the two positions combining to give you the following setup:
Combined position: USD Short USD Long = RUB Long
RUB Long MXN Short MXN Short
The opposing positions (long and short) in each pair would cancel out the USD exposure (shown in red). Therefore, you are left with a long position in the RUB and short position in the MXN.
CFD’s, Options and Forex are leveraged products which can result in losses that exceed your initial deposit. These products may not be suitable for all investors and you should seek independent advice if necessary.
Editors’ Picks
EUR/USD stays bid near 1.1650 ahead of Fed rate decision
EUR/USD keeps the green near the 1.1650 level in the European session on Wednesday. Markets turn cautious and ignore the US Dollar ahead of the US Federal Reserve interest rate decision later on Wednesday, where a 25 bps rate cut is almost fully priced in. Meanwhile, cautious ECB-speak keeps the Euro afloat.
GBP/USD holds gains above 1.3300, eyes on Fed outcome
GBP/USD trades on a firmer note above 1.3300 in Wednesday's European session. The US Dollar weakens against the Pound Sterling as the US Federal Reserve is widely expected to announce another interest rate cut on Wednesday. Next of note will be the UK monthly Gross Domestic Product (GDP) report that will be published on Friday.
Japanese Yen bulls seem hesitant as fiscal concerns offset BoJ rate hike bets, ahead of Fed
The Japanese Yen remains on the front foot against a broadly weaker US Dollar through the early European session on Wednesday, though it lacks bullish conviction. Japan’s Corporate Goods Price Index exceeded expectations and reaffirmed bets for an imminent rate hike by the Bank of Japan.
Editors’ Picks
EUR/USD stays bid near 1.1650 ahead of Fed rate decision
EUR/USD keeps the green near the 1.1650 level in the European session on Wednesday. Markets turn cautious and ignore the US Dollar ahead of the US Federal Reserve interest rate decision later on Wednesday, where a 25 bps rate cut is almost fully priced in. Meanwhile, cautious ECB-speak keeps the Euro afloat.
GBP/USD holds gains above 1.3300, eyes on Fed outcome
GBP/USD trades on a firmer note above 1.3300 in Wednesday's European session. The US Dollar weakens against the Pound Sterling as the US Federal Reserve is widely expected to announce another interest rate cut on Wednesday. Next of note will be the UK monthly Gross Domestic Product (GDP) report that will be published on Friday.
Gold struggles around $4,200, looks to Fed for fresh impetus
Gold extends its sideways consolidative price move through the European session and trades around $4,200 this Wednesday. Traders now seem reluctant and opt to wait for the outcome of a two-day FOMC policy meeting later in the day. The key focus will be on updated economic projections and Powell's speech.
Federal Reserve expected to cut interest rates as disagreement among officials grows
The United States (US) Federal Reserve (Fed) will announce its interest rate decision on Wednesday, with markets widely expecting the US central bank to deliver a final 25 bps cut for 2025.
BoC expected to hold interest rate, signaling the end of easing cycle
The Bank of Canada is widely expected to maintain its benchmark interest rate at 2.25% at its meeting on Wednesday. That would follow two consecutive quarter-point rate cuts in September and October.
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