The Mexican Peso surged after strong US Nonfarm Payrolls data for September exceeded expectations. Despite an uptick in Mexico’s unemployment, the country’s Automobile Exports and Production saw increases in September. The US Unemployment Rate also edged lower, alleviating recession concerns. The Federal Reserve is anticipated to cut rates by 25 basis points in upcoming meetings.
On Friday, the Mexican Peso appreciated against the US Dollar, driven by an impressive US jobs report that mitigated recession fears in the world’s largest economy. Market participants remain optimistic about President Claudia Sheinbaum’s government being “market-friendly,” despite some controversial measures. The USD/MXN traded at 19.17, down 0.83%.
Positive sentiment grew as Wall Street rallied following the US Nonfarm Payrolls data for September, which not only exceeded estimates but also revised July and August figures upward. Consequently, the Unemployment Rate decreased, providing relief for the Federal Reserve, which had cut rates by 50 basis points in September due to employment risks.
This bolstered the Greenback against most G8 currencies, though not against the Peso. The Mexican currency is poised to end the week with gains exceeding 2%.
Additionally, traders reduced the likelihood of a 50 bps Fed rate cut in November, now estimating a 25 bps cut in the next four meetings. Bank of America adjusted its November Fed forecast from a 50 to a 25 bps cut.
Chicago Fed President Austan Goolsbee, a non-voter in 2024 but a dovish member of the Federal Open Market Committee (FOMC), stated that more reports like this would increase his confidence in achieving full employment. He noted that most Fed officials expect rates to decrease over the next 18 months.
In Mexico, the jobs report indicated a slight increase in the Unemployment Rate for August. However, Automobile Exports and Production rose in September, according to the Instituto Nacional de Estadistica, Geografia e Informatica (INEGI).
Daily Digest Market Movers: Mexican Peso Resilient Amid Mixed Data
– Auto Production and Exports: Auto Production rose by 11.71% in September, up from 8.3% in August. Exports increased by 4.8%, compared to 1.7% in August.
– Jobless Rate: Mexico’s Jobless Rate in August was 3%, higher than July’s 2.9%.
– US Nonfarm Payrolls: Grew by 254K in September, surpassing estimates of 140K, with August figures revised upward to 159K. The Unemployment Rate decreased from 4.2% to 4.1%.
– Inflation Expectations: Banxico’s September poll showed a downward revision in inflation expectations, with headline prices down from 4.69% to 4.48% YoY. Underlying inflation is expected to hit 3.84%, down from 3.94%.
– USD/MXN Exchange Rate: Projected to end 2024 at 19.69, with Banxico’s main reference rate expected to end at 10%.
– Economic Growth: Mexico’s economy is forecasted to grow by 1.45% in 2024, down from August’s 1.57%.
USD/MXN Technical Outlook: Peso Strengthens as USD/MXN Falls Below 19.20
The USD/MXN uptrend is uncertain as the pair fell below the 50-day Simple Moving Average (SMA) at 19.33, with sellers gaining momentum. The Relative Strength Index (RSI) turned bearish, indicating a downward trend for the pair.
The first support level for USD/MXN is the 50-day Simple Moving Average (SMA), followed by the September 24 swing low of 19.23. The next support is the September 18 daily low of 19.06, just above the psychological level of 19.00.
For a bullish trend to resume, USD/MXN needs to surpass the 19.50 mark and the October 1 daily high of 19.82. Beyond this, the next resistance levels are 20.00 and the year-to-date peak of 20.22.
Source: FX Street
