Amidst a softer employment report in the United States (US), USD/MXN retraced part of Thursday’s gains on Friday, alleviating pressure on the Federal Reserve (Fed) to maintain its tightening monetary stance. As a result, the US Dollar (USD) experienced a decline, creating favorable conditions for the Mexican Peso (MXN) to strengthen. At present, USD/MXN is trading at 17.0579, reflecting a loss of 1.55% during the middle of the North American session.
Mexican Peso Gains as Risk Appetite Improves; US Equities Rise and Bond Yields Decline
USD/MXN maintains its downward bias, yet a daily close above 17.0000 may open the path for additional upside potential. The Mexican Peso (MXN) was bolstered by an improvement in risk appetite, evident through gains in US equities and a decline in US bond yields.
US Nonfarm Payrolls for July fell short of estimates at 187K, impacting the US Dollar. The Unemployment Rate rose to 3.6%, above forecasts, while Average Hourly Earnings climbed by 4.4% YoY, surpassing expectations. The Federal Reserve remains data-dependent, with interest rates increasing by 525 basis points since March 2022.
USD/MXN traders must consider the Fed’s cautious approach and the need for sustained improvements. The US Dollar Index (DXY) dropped 0.70% to 101.766 due to declining US Treasury bond yields.
On the Mexican front, Gross Fixed Investment rose 4.5% MoM, surpassing May’s 0%.
Next week, the US economic agenda includes July’s inflation report, the Balance of Trade, and Fed speakers. In Mexico, Consumer Confidence and the inflation rate will be closely monitored by the Bank of Mexico (Banxico), which has maintained rates unchanged in recent monetary policy meetings.
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