Most recent article: Mexican Peso slides amid Powell’s hawkish comments

  • 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) losses territory against the US Dollar (USD) on Friday following a jobs report revealed by the US Bureau of Labor Statistics (BLS). The 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 17.14, 0.37% up, but down 0.10% in the week.

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

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

Share: Feed news

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


Recommended content

Editors’ Picks

EUR/USD sits at yearly lows near 1.0550 ahead of EU GDP, US PPI data

EUR/USD sits at yearly lows near 1.0550 ahead of EU GDP, US PPI data

EUR/USD is trading near 1.0550 in the European session on Thursday, sitting at the lowest level in a year. The Trump trades-driven relentless US Dollar buying and German political instability weigh on the pair. Traders await EU GDP data and US PPI report ahead of Fed Chair Powell's speech. 

EUR/USD News
GBP/USD holds losses below 1.2700 on sustained US Dollar strength

GBP/USD holds losses below 1.2700 on sustained US Dollar strength

GBP/USD is holding losses near multi-month lows below 1.2700 in European trading on Thursday. The pair remains vulnerable amid a broadly firmer US Dollar and softer risk tone even as BoE policymakers stick to a cautious stance on policy. Speeches from Powell and Bailey are eyed. 

GBP/USD News
Gold price hits fresh two-month low as the post-election USD rally remains uninterrupted

Gold price hits fresh two-month low as the post-election USD rally remains uninterrupted

Gold price drifts lower for the fifth consecutive day and drops to its lowest level since September 19, around the $2,554-2,553 region heading into the European session on Thursday. The commodity continues to be weighed down by an extension of the US Dollar's post-election rally to a fresh year-to-date.

Gold News
XRP struggles near $0.7440, could still sustain rally after Robinhood listing

XRP struggles near $0.7440, could still sustain rally after Robinhood listing

Ripple's XRP is trading near $0.6900, down nearly 3% on Wednesday, as declining open interest could extend its price correction. However, other on-chain metrics point to a long-term bullish setup.

Read more
Trump vs CPI

Trump vs CPI

US CPI for October was exactly in line with expectations. The headline rate of CPI rose to 2.6% YoY from 2.4% YoY in September. The core rate remained steady at 3.3%. The detail of the report shows that the shelter index rose by 0.4% on the month, which accounted for 50% of the increase in all items on a monthly basis. 

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures