Introduction
The Mexican peso experienced a marginal decline against the US dollar during mid-week trading as market participants absorbed more robust employment figures from the United States than anticipated.
Market Performance
At the close of trading, the Mexican peso was virtually unchanged against the dollar, with the exchange rate ending at 17.1856 pesos per dollar. According to official data from Mexico’s central bank, Banco de México (Banxico), this represented a marginal loss of 0.03%, less than a cent, compared to the previous day’s rate of 17.1804 pesos per dollar.
The dollar’s price fluctuated between a high of 17.2690 pesos and a low of 17.1307 pesos. The Intercontinental Exchange’s Dollar Index (DXY), which compares the US dollar to six reference currencies, remained stable at 96.86 units.
Market Volatility
During the trading session’s opening, the exchange rate reached a low of 17.1307 pesos per dollar. This rise was attributed by analysts to local data, as Mexico’s industrial activity unexpectedly increased in December, providing a positive boost to the currency.
However, this trend shifted after reports emerged that US President Donald Trump might be considering whether the United States should withdraw from the T-MEC trade agreement, according to Juan Carlos Cruz Tapia, CEO of México Financiero.
Furthermore, the release of non-agricultural employment data from the United States, which significantly exceeded expectations (130,000 jobs added versus the forecasted 70,000), initially led to an appreciation of the US dollar, contained within the upper range of its trading limits.
US Employment Data and Fed Expectations
The non-agricultural employment data from the United States showed an increase of 130,000 jobs in the previous month, a figure far surpassing analysts’ expectations of 70,000 new jobs. Additionally, the unemployment rate fell to 4.3% from 4.4%, indicating a robust economy.
These strong employment figures come after retail sales data for December remained stable, suggesting that the market anticipates the Federal Reserve will resume interest rate adjustments in June, as per FedWatch.
“Weak sales could be interpreted as temporary noise, while wage pressures would keep the Fed cautious. A robust labor market implies that low-interest rates might take longer to arrive,” said Eduardo Ramos, an analyst at VT Markets.
Resilience of the Mexican Peso
Throughout this year’s start, the Mexican peso has demonstrated resilience, appreciating to a low of 17.10 pesos per dollar and holding steady despite expectations that the US dollar might find some relief due to a measured monetary policy from the Fed amidst risks.
“The most likely scenario is for stability within the 17.10 to 17.25 pesos per dollar range if the market fully absorbs the strength of US employment figures and if Friday’s inflation data does not bring any unwelcome surprises,” explained Felipe Mendoza, CEO of IMB Capital Quants.
Key Questions and Answers
- What happened to the Mexican peso against the US dollar during mid-week trading? The Mexican peso experienced a marginal decline against the US dollar.
- Why did this happen? Market participants were absorbing more robust employment figures from the United States than anticipated.
- What were the employment figures from the US? The US added 130,000 jobs in the previous month, surpassing analysts’ forecast of 70,000 new jobs. The unemployment rate fell to 4.3% from 4.4%.
- How did these figures impact the Mexican peso? The stronger-than-expected US employment data initially led to an appreciation of the US dollar, containing it within its trading limits.
- What are market expectations for the Federal Reserve’s interest rate adjustments? Market participants anticipate that the Federal Reserve will resume interest rate adjustments in June due to robust employment figures.
