- Mexican Peso hit an eight-day high of 17.99 before losing traction.
- Light economic week in Mexico; upcoming data includes May CPI, Consumer Confidence, and Banxico meeting minutes.
- US Nonfarm Payrolls exceed expectations; revisions to prior months fuel predictions of Fed easing.
The Mexican Peso was virtually flat against the US Dollar on Friday after seesawing within the 17.99 – 18.19 range. Mixed US jobs data sparked speculation that the Federal Reserve (Fed) could cut interest rates in September, sending the emerging market currency soaring before the USD/MXN trimmed its losses and traded at 18.08, posting minimal gains of 0.02%.
Wall Street trades mixed, while the Greenback stages a slim recovery against the Mexican currency. Mexico’s economic docket is empty, with traders eyeing the release of the Consumer Price Index (CPI) for May next week, along with Consumer Confidence and the Bank of Mexico’s (Banxico) last monetary policy meeting minutes.
The US Nonfarm Payrolls report for June beat estimates, though downward revisions to April and May’s figures prompted traders to increase their bets that the Fed will begin its easing cycle in September.
Additional data showed that Average Hourly Earnings (AHE) were flat monthly but dipped in the twelve months to June and the Unemployment Rate rose, according to the US Bureau of Labor Statistics (BLS).
Following the data release, US Treasury yields tumbled, with the 10-year benchmark note rate falling six-and-a-half basis points to 4.284%, a headwind for the US Dollar. Meanwhile, the US Dollar Index, which tracks the buck’s performance against six currencies, dropped 0.12% yet trimmed some earlier losses and is currently around 105.00.
According to the CME FedWatch Tool, the odds for a September 2024 cut are 70% higher than the chance a day ago of 66%.
Daily digest market movers: Mexican Peso rises further on US Dollar weakness
- Banxico’s survey showed that economists estimate the Gross Domestic Product (GDP) to end the year at 2%, down from 2.1%. They expect Banxico to cut rates from 11.00% to 10.25%, up from 10.00% projected in May.
- Some analysts in Mexico estimate the economy might slow down but dodge a recession, according to the National Statistics Agency (INEGI) Coincident Indicator. Despite that, they said reforms pushed by President Andres Manuel Lopez Obrador (AMLO), particularly the judiciary reform, could affect the country’s creditworthiness.
- US Nonfarm Payrolls grew by 206K, exceeding the estimated 190K, but April and May were revised lower from 165K to 108K and 272K to 218K, respectively.
- Average Hourly Earnings (AHE) edged lower from 4.1% to 3.9% YoY, as expected, while the Unemployment Rate rose from 4% to 4.1%.
Technical analysis: Mexican Peso stays near weekly lows, USD/MXN hovers around 18.10
The USD/MXN dropped to an eight-day low of 17.99 just to find bids that pushed the exchange rate back toward the 18.10 area. Friday’s price action is forming a Doji candle, an indication that neither buyers nor sellers are winning the battle that could keep the exotic pair trading within the 18.00-18.10 in the short term.
Momentum shows a slight recovery as the Relative Strength Index (RSI) turned flat in bullish territory after posting three days of lower readings. This confirms the USD/MXN range-bound trading.
For a bullish resumption, the USD/MXN must surpass 18.10, followed by a rally above the June 28 high of 18.59, so buyers can challenge the YTD high at 18.99. Conversely, sellers will need a drop below 18.00, which could extend the pair’s decline toward the December 5 high, which turned support at 17.56, followed by the 50-day Simple Moving Average (SMA) at 17.37.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD retreats from daily highs, holds above 1.0800
EUR/USD loses traction but holds above 1.0800 after touching its highest level in three weeks above 1.0840. Nonfarm Payrolls in the US rose more than expected in June but downward revisions to May and April don't allow the USD to gather strength.
GBP/USD struggles to hold above 1.2800 after US jobs data
GBP/USD spiked above 1.2800 with the immediate reaction to the mixed US jobs report but retreated below this level. Nonfarm Payrolls in the US rose 206,000 in June. The Unemployment Rate ticked up to 4.1% and annual wage inflation declined to 3.9%.
Gold approaches $2,380 on robust NFP data
Gold intensifies the bullish stance for the day, rising to the vicinity of the $2,380 region following the publication of the US labour market report for the month of June. The benchmark 10-year US Treasury bond yield stays deep in the red near 4.3%, helping XAU/USD push higher.
Crypto Today: Bitcoin, Ethereum and Ripple lose key support levels, extend declines on Friday
Crypto market lost nearly 6% in market capitalization, down to $2.121 trillion. Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) erased recent gains from 2024.
French Elections Preview: Euro to “sell the fact” on a hung parliament scenario Premium
Investors expect Frances's second round of parliamentary elections to end with a hung parliament. Keeping extremists out of power is priced in and could result in profit-taking on Euro gains.