Mexican Peso weakens against US Dollar on US NFP data

• Mexican Peso down 0.35% vs. USD, hit by strong US jobs data and Mexico's investment decline.
• S&P maintains Mexico's BBB rating, focusing on 2024 elections impact.
• US economic vigor from employment, Factory Orders and consumer sentiment adds to MXN pressure.

The Mexican Peso (MXN) depreciates against the US Dollar (USD) on Friday following a jobs report revealed by the US Bureau of Labor Statistics (BLS). That report signaled the economy in the United States (US) remains solid amid a tight labor market. Besides that, weaker-than-expected data from Mexico sponsored the exotic pair with a leg up ahead of the weekend. The USD/MXN trades at 17.13, 0.35% higher.

According to November’s data revealed by the National Statistics Agency, Mexico witnessed a dip in Gross Fixed Investment. It should be said that S&P maintained Mexico´s sovereign debt rating as BBB ahead of the general elections on June 2, 2024.

Across the borders, the US Nonfarm Payrolls (NFP) report revealed January’s employment data, which was outstanding, painting an upbeat economic outlook for the US. Further data revealed that Factory Orders rose moderately, while American household sentiment remained positive.

Daily digest market movers: Mexican Peso loses ground on strong US jobs report

• Mexico´s Gross Fixed Investment fell -1.3% MoM in November, below October’s 1.7% expansion.
• S&P Global confirmed Mexico´s BBB foreign currency rating and BBB+ local currency long-term debt rating.
• S&P Global affirmed that stable macroeconomic conditions, with a real growth in Gross Domestic Product above 3% in 2023 that is supported by solid domestic demand and moderating inflation, prepare the way for the general elections in June.
• The US Nonfarm Payrolls for January showed the economy created 353K jobs while exceeding forecasts of 180K and upwardly revised figures for December. Average Hourly Earnings in monthly and yearly numbers rose, signaling that workers are asking for better salaries, while the Unemployment Rate was unchanged at 3.7%.
• Factory Orders for newly manufactured goods climbed modestly by 0.2%, aligning with estimates and trailing November’s 2.6% expansion.
• The University of Michigan Consumer Sentiment index on its final reading for January improved to 79.1 from 78.9. Inflation expectations for one year were 2.9%, down from 3.1%, and for five years they were flat at 2.9%.

Technical Analysis: Mexican Peso weakens further, as USD/MXN buyers target 17.20

The USD/MXN remains trading sideways, but it has pierced above the 50-day Simple Moving Average (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. That level would be followed by the 100-day SMA at 17.38. Once that area is cleared, the exotic pair could extend its gains to 17.50.

Conversely, a bearish resumption could happen if USD/MXN slips below the 50-day SMA, clearing the way toward the January 22 daily low of 17.05. Further downside is expected once the pair breaks below the 17.00 figure.

USD/MXN Price Action – Daily Chart