Mexican Peso Closes the Week Strong After U.S. Non-Farm Payroll Data

The Mexican peso strengthened against the U.S. dollar this week, supported by growing bets that the Federal Reserve (Fed) will cut interest rates during its December 17-18 meeting.

The exchange rate ended Friday’s session at 20.1793 pesos per dollar, improving from the previous day’s official close of 20.2043 pesos, based on data from the Bank of Mexico (Banxico). This marks a gain of 2.5 cents, or 0.12%, for the local currency.

Throughout the day, the USD/MXN, reaching a high of 20.2855 pesos and a low of 20.1016 pesos. Meanwhile, the U.S. Dollar Index (DXY), which measures the dollar’s performance against six major currencies, rose 0.28%, closing at 106.01 points.

USD/MXN

Job Market Data

On Friday, U.S. non-farm payroll data revealed an increase of 227,000 jobs in November, significantly higher than the 36,000 jobs added in October. Despite this robust growth, the report did not shift expectations for a potential Fed rate cut on December 18.

October’s weak payroll numbers were attributed to strikes and hurricanes, but November’s rebound aligned with market expectations. According to the CME FedWatch tool, there is an 87% probability of a 25-basis-point rate cut at the upcoming meeting.

Federal Reserve Policy

Earlier this week, Fed Chair Jerome Powell noted the U.S. economy’s resilience, suggesting the central bank might adopt a more cautious approach to further rate cuts. However, the latest data supported ongoing expectations for a December rate reduction.

The labor market’s strong performance despite last month’s disruptions underscores its resilience and adds weight to the case for a year-end rate cut.

For the week, the peso appreciated 0.89%, recovering 18.18 cents from last Friday’s close of 20.3611 pesos. However, year-to-date, the peso has weakened 18.93%, falling 3.21 pesos compared to its value of 16.9666 pesos in 2023.

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.