- The Mexican peso has experienced a 0.35% decrease compared to the USD due to robust US job data and the decline in investment in Mexico.
- S&P affirms Mexico’s BBB rating, with a particular emphasis on the potential influence of the 2024 elections.
- The strength of the US economy, driven by robust employment, increased factory orders, and positive consumer sentiment, is contributing to the downward pressure on the Mexican peso.
Following the publication of a jobs report by the United States Bureau of Labor Statistics (BLS) on Friday, the Mexican Peso (MXN) experienced a decline in value in comparison to the United States Dollar (USD).
According to the report, the economy of the United States is still doing well despite the fact that the job market is highly competitive. In addition, the exotic pair received a boost well before the weekend as a result of less favorable data coming from Mexico.
The USD/MXN exchange rate has increased by 0.37% and is currently trading at 17.14. However, it has decreased by 0.10% over the past week.
A decrease in Gross Fixed Investment in Mexico was disclosed by the National Statistics Agency in November, according to data that the agency released. It is essential to note that S&P has maintained Mexico’s sovereign debt rating at BBB in preparation for the general elections that are scheduled to take place on June 2, 2024.
The United States Nonfarm Payrolls (NFP) report that was released over the borders revealed exceptional employment data for January and illustrated a positive economic outlook for the United States. The additional information showed a slight increase in the number of factory orders, while the sentiments of American households remained optimistic.
Loss of Ground for the Mexican Peso as a result of a Strong US Jobs Report
- In November, Mexico’s gross fixed investment declined by -1.3%, lower than the 1.7% growth seen in October.
- S&P Global has affirmed Mexico’s BBB rating for foreign currency and BBB+ rating for long-term debt in local currency.
- S&P Global has confirmed that the current macroeconomic conditions are stable, with a projected real growth in Gross Domestic Product of over 3% in 2023. This growth is being driven by strong domestic demand and a decrease in inflation. These positive economic factors are setting the stage for the upcoming general elections in June.
- The US Nonfarm Payrolls for January revealed a remarkable surge in job creation, surpassing expectations of 180K and even surpassing the revised figures for December. A whopping 353K jobs were added to the economy, painting a positive picture of the labor market. The monthly and yearly statistics for Average Hourly Earnings increased, indicating a growing demand from workers for improved salaries. Meanwhile, the Unemployment Rate remained steady at 3.7%.
- Factory Orders for newly produced goods increased slightly by 0.2%, in line with expectations and following November’s growth of 2.6%.
- The final reading for January of the University of Michigan Consumer Sentiment Index saw a slight improvement, rising to 79.1 from 78.9. The projected inflation rate for the next year decreased slightly to 2.9%, compared to the previous estimate of 3.1%. Similarly, the expected inflation rate for the next five years remained unchanged at 2.9%.
Additional Depreciation of the Mexican Peso Occurs as Buyers of USD/MXN Aim for 17.20
The USD/MXN continues to trade in a horizontal pattern. However, it has managed to break above the 50-day Simple Moving Average (SMA) at 17.13. This breakthrough could lead to additional upward movement.
If buyers manage to surpass that level and close above it, they can maintain optimism about the possibility of reaching the 200-day SMA at 17.32. The 100-day SMA would follow that level at 17.38. After clearing that region, the unique duo has the potential to expand its profits to 17.50.
On the other hand, if USD/MXN falls below the 50-day SMA, it could lead to a bearish continuation, opening up the possibility of reaching the daily low of 17.05 from January 22. Additional decline is anticipated once the pair surpasses the 17.00 mark.