The Mexican peso gained ground on Friday as the U.S. dollar weakened broadly, following the release of lower-than-expected U.S. employment figures. This shift in market sentiment fueled growing expectations that the U.S. Federal Reserve may initiate an aggressive series of interest rate cuts this month.
As of Friday, the Mexican peso (MXN=) was trading at 19.8084 per U.S. dollar, representing a 0.26% increase compared to Thursday’s Reuters reference price. On Thursday, the peso had weakened significantly, reaching 20.1520 units per dollar, its lowest level since October 2022. The Thursday depreciation was driven primarily by domestic concerns regarding the progress of a controversial judicial reform in Mexico’s Congress.
The weaker-than-expected U.S. employment data provided a welcome relief for the peso, reversing some of its earlier losses. According to the report released on Friday, nonfarm payrolls in the United States increased by only 142,000 jobs in August, falling short of the market’s expectation of 160,000 new jobs. Despite this underwhelming job growth, the U.S. unemployment rate dropped to 4.2%.
While the peso’s rebound during Friday’s session was notable, the currency remained poised to close the week with an accumulated loss of 0.50%, driven by the previous day’s sharp depreciation. Market analysts are closely watching the developments both in the U.S. economy and in Mexico’s legislative landscape, as these factors will continue to influence currency movements in the near future.
In the short term, the expectation of a potential rate cut by the U.S. Federal Reserve is likely to ease pressure on emerging market currencies like the Mexican peso. Lower interest rates in the U.S. typically make the dollar less attractive to investors, increasing demand for higher-yielding currencies such as the peso. However, local political factors, including the contentious judicial reform, could continue to weigh on the peso’s performance.
The reform in question has sparked widespread debate in Mexico, with critics arguing that it could undermine judicial independence, while supporters believe it will lead to much-needed changes in the justice system. The uncertainty surrounding this reform has created some volatility in Mexican markets, particularly in the foreign exchange market.
Looking ahead, the peso’s performance will largely depend on a combination of external factors, such as the direction of U.S. monetary policy, and internal developments in Mexico’s political and economic landscape. As the Federal Reserve moves closer to its next meeting, traders and investors will be paying close attention to any further economic data that could influence the decision on interest rates.
For now, the peso’s slight appreciation on Friday provides a temporary respite, but significant challenges remain, both domestically and internationally. As markets digest the latest employment data and prepare for potential shifts in monetary policy, the Mexican peso’s trajectory will remain closely tied to the evolving economic outlook on both sides of the border.
The Mexican peso gained ground on Friday as the U.S. dollar weakened broadly, following the release of lower-than-expected U.S. employment . . .
