Market Reaction to US Employment Data
The Mexican peso weakened against the US dollar on Wednesday, breaking a streak of seven consecutive gains. This shift occurred as the market absorbed lower-than-expected employment figures from the United States.
US Employment Figures
The ADP National Employment Report revealed a decrease of 33,000 private sector jobs in June, following a revised downward adjustment of 29,000 in May. Analysts had predicted an increase of 95,000 positions.
Fiscal Package and Debt Concerns
Investors are also monitoring the progress of US President Donald Trump‘s fiscal and spending package, which was approved by the Senate. This package could potentially increase the country’s debt by $3.3 trillion, according to analysts.
Peso’s Recent Strength and Subsequent Weakness
The peso had been gaining strength for seven consecutive days, driven by the conclusion of a 12-day conflict between Iran and Israel and signs of progress in the US-Canada trade negotiations at the start of this week.
- During its positive streak, the peso appreciated by 43.76 centavos (2.28%), reaching its highest level since August 20.
- Despite the recent weakening, technical analysts maintain a positive outlook for the currency.
- Banorte, in a report, stated: “We believe the recovery will continue. Breaking through 18.65 will signal a more favorable trend. In this context, the next technical resistance stands at 18.55. Meanwhile, resistance is seen at 18.85 pesos.”
Market Focus on Upcoming US Employment Data
Traders are anticipating the release of non-farm payroll data from the US Bureau of Labor Statistics tomorrow. The Federal Reserve, which aims for controlled inflation and full employment, will receive this report. Another weak data point could bolster expectations for interest rate cuts.
Key Questions and Answers
- What caused the Mexican peso to weaken against the US dollar? The peso weakened due to lower-than-expected employment figures from the United States, which surprised market expectations.
- What recent events had previously strengthened the Mexican peso? The peso had been gaining strength due to the end of a conflict between Iran and Israel and progress in US-Canada trade negotiations.
- What is the potential impact of President Trump’s fiscal package on the US economy? Analysts predict that this package could increase the country’s debt by $3.3 trillion, potentially affecting economic stability.
- How are technical analysts viewing the peso’s recent performance? Despite the recent weakening, technical analysts remain optimistic about the peso’s future performance.
