- The Mexican Peso falls 0.35% against the Dollar, affected by good employment data from the US and the decline in investment in Mexico.
- S&P maintains Mexico's BBB rating, focusing on the impact of the 2024 elections.
- The strength of the US economy from employment, factory orders and consumer sentiment add to the pressure on the MXN.
The Mexican Peso (MXN) depreciates against the United States Dollar (USD) this Friday following the employment report revealed by the United States Bureau of Labor Statistics (BLS). This report reported that the United States (US) economy remains solid amid a tight labor market. Additionally, less encouraging than expected data from Mexico boosted the pair ahead of the weekend. The USD/MXN pair is trading at 17.13, up 0.35%.
According to November data revealed by the National Statistics Agency, Mexico witnessed a drop in Gross Fixed Investment. It must be said that S&P maintained the rating of Mexico's sovereign debt at BBB ahead of the general elections on June 2, 2024.
Across the border, the US Nonfarm Payrolls (NFP) report showed January employment data was outstanding, painting an optimistic economic outlook for the United States. Other data revealed that factory orders increased moderately, while US household sentiment remained positive.
Daily Market Summary: Mexican Peso Loses Ground Following Strong US Jobs Report
- Mexico's gross fixed investment fell -1.3% month-on-month in November, down from October's 1.7% expansion.
- S&P Global confirmed the BBB rating in foreign currency and BBB+ in local currency of Mexico's long-term debt.
- S&P Global stated that stable macroeconomic conditions, with real GDP growth above 3% in 2023 that is supported by strong domestic demand and moderate inflation, pave the way for the general elections in June.
- US Nonfarm Payrolls for January showed the economy created 353,000 jobs, beating forecasts of 180,000 and upwardly revised December numbers. Average hourly earnings in monthly and annual figures rose, a sign that workers are demanding better wages, while the unemployment rate remained unchanged at 3.7%.
- Factory orders for newly manufactured goods rose modestly 0.2%, in line with estimates and lagging November's 2.6% expansion.
- The University of Michigan's index of consumer sentiment in its final reading for January improved to 79.1 from 78.9. One-year inflation expectations stood at 2.9%, below 3.1%, and five years they remained stable at 2.9%.
Technical Analysis: Mexican Peso weakens further as USD/MXN buyers target 17.20
USD/MXN continues to trade sideways but has broken above the 50-day SMA at 17.13, which could pave the way for further gains. If buyers achieve a daily close above that level, they should remain hopeful of challenging the 200-day SMA at 17.32. This level would be followed by the 100-day SMA at 17.38. Once above this zone, the exotic pair could extend its gains to 17.50.
Conversely, a bearish resumption could occur if USD/MXN slides below the 50-day SMA, clearing the way towards the January 22 daily low at 17.05. A further decline is expected once the pair breaks below the 17.00 figure.
USD/MXN Price Action – Daily Chart
Frequently Asked Questions about the Mexican Peso
What is MXN?
The Mexican Peso is the legal tender of Mexico. The MXN is the most traded currency in Latin America and the third most traded on the American continent. The Mexican Peso is the first currency in the world to use the $ sign, prior to the later use of the Dollar. The Mexican Peso or MXN is divided into 100 cents.
What is Banxico and how does it influence the MXN?
Banxico is the Bank of Mexico, the country's central bank. Created in 1925, it provides the national currency, the MXN, and its priority objective is to preserve its value over time. In addition, the Bank of Mexico manages the country's international reserves, acts as a lender of last resort to the banks and advises the government economically and financially. Banxico uses the tools and techniques of monetary policy to meet its objective.
How does inflation impact the MXN?
When inflation is high, the value of the Mexican Peso (MXN) tends to decrease. This implies an increase in the cost of living for Mexicans that affects their ability to invest and save. At a general level, inflation affects the Mexican economy because Mexico imports a significant amount of final consumption products, such as gas, fuel, food, clothing, etc., and a large amount of production inputs. On the other hand, the higher the inflation and debt, the less attractive the country is for investors.
How does the Dollar influence the Mexican Peso (MXN)?
The exchange rate between the USD and the MXN affects imports and exports between the United States and Mexico, and may affect demand and trade flows. The price of the Dollar against the Mexican Peso is affected by factors such as monetary policy, interest rates, the consumer price index, economic growth and some geopolitical decisions.
How does the Fed's monetary policy affect Mexico?
The exchange rate between the USD and the MXN affects imports and exports between the United States and Mexico, and may affect demand and trade flows. The price of the Dollar against the Mexican Peso is affected by factors such as monetary policy, interest rates, the consumer price index, economic growth and some geopolitical decisions.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
