Background on the Mexican Peso and its Recent Performance
The Mexican Peso continued its advance against the US Dollar in the second session of the week, marking its best closing level for the year. This progress was supported by a weakened dollar following reports on US retail sales and employment figures.
Factors Driving the Peso’s Strength
The Mexican currency’s improvement of 0.17% or 3.03 centavos to 17.9509 pesos per dollar was observed against a backdrop of expected reports on US retail sales and labor market conditions. The dollar’s movement ranged from a high of 18.0017 pesos to a low of 17.9287 pesos, its best level in 17 months.
The Dollar Index (DXY) from the Intercontinental Exchange, which measures the dollar against six reference currencies, fell 0.14% to 98.14 units.
US Employment Data and Its Impact
The growth in US employment rebounded in November after non-agricultural payrolls decreased in October due to public spending adjustments. However, the US unemployment rate stood at 4.6%, its highest level in four years.
“The market behavior was orderly, reflecting a combination of a contained dollar and favorable flows towards the peso, despite the slightly upward surprise in the US non-agricultural payrolls report,” said Felipe Mendoza, CEO of IMB Capital Quants.
“The report confirms a relatively stable environment in a somewhat weaker labor market, without any worrying signals. Moreover, the report is contextualized within a backdrop of disruptions in government employment and increased statistical noise,” added SURA Investments.
Retail Sales and Consumer Spending
US retail sales showed stability in October, while consumer spending remained robust at the start of Q4 despite rising inflation forcing households to cut back on expenses. An increase of 0.1% was anticipated.
“This information does not change the outlook on the Fed’s interest rate trajectory, which is still evaluating the probability of a rate cut during the first quarter of 2026 and another one before the end of the first half,” SURA mentioned in their report.
Local Factors and Banxico Policy Decision
Traders are focusing on the Banxico policy decision, which will be announced on Thursday. Market consensus anticipates a 12th consecutive 25-basis-point rate cut, lowering the benchmark to 7%.
“For the coming days, the dollar-peso parity could fluctuate between 17.90 and 18.05 pesos, with a likelihood of consolidation at lower levels if the global dollar remains weak,” Felipe Mendoza from IMB Capital Quants noted in his analysis.
Key Questions and Answers
- Q: What drove the Mexican Peso’s advance against the US Dollar?
A: The Mexican Peso’s progress was supported by a weakened US Dollar following reports on US retail sales and employment figures, along with favorable flows towards the peso.
- Q: How did the US employment data impact the Peso?
A: Although the US non-agricultural payrolls report slightly surprised to the upside, the overall context of a relatively stable labor market without worrying signals supported the Peso.
- Q: What was the impact of US retail sales and consumer spending on the Peso?
A: Despite rising inflation, US retail sales showed stability in October, and consumer spending remained robust. This context supported the Peso’s advance.
- Q: How is the Mexican central bank (Banxico) influencing the Peso’s performance?
A: Traders are anticipating a 12th consecutive rate cut by Banxico, which could impact the Peso’s value in the coming days.
