USD/EM pairs surge as Trump considers Cuba blockade, risk-off flows dominate

USD has strengthened sharply against emerging market currencies, with USD/MXN jumping 1.2% to 20.85 and USD/BRL surging 1.5% to 6.02, as reports emerge of the Trump administration considering a total blockade of Cuba. The potential escalation has triggered significant risk-off sentiment across Latin American markets, driving investors toward safe-haven USD positions. Regional currencies are experiencing broad-based selling pressure, with the Colombian peso and Chilean peso also declining 0.8% and 0.6% respectively against the greenback. The geopolitical uncertainty has pushed USD/COP to test resistance at 4,450 while USD/CLP approaches the 990 level. Market participants are pricing in increased regional instability risks, with implied volatility on LatAm currency pairs spiking notably. Should the blockade materialize, further USD strength against emerging market currencies is likely, particularly for countries with significant Cuban trade exposure.