Title: Mexican Peso Strengthens Against Weakening American Dollar on Disappointing US Employment Data
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The Mexican peso gained ground against the American dollar on Friday, bolstered by the greenback’s weakness following the release of disappointing employment data in the United States. The local currency’s recovery was driven by the revelation of a greater deceleration than expected in the US job market.
The exchange rate closed the day at 17.1444 units per dollar, marking an improvement of 9.31 cents (equivalent to 0.54 percent) from the previous day’s close of 17.2375 units per dollar, according to official data from the Bank of Mexico (Banxico).
Throughout the day, the currency pair traded within a range of 17.0708 pesos to a maximum of 17.3963 units. The Dollar Index (DXY) of the Intercontinental Exchange, a measure of the dollar against the basket of G7 currencies, also experienced a decline of 0.86%, finishing at 102.28 points at market close.
The major catalyst behind the peso’s surge was the unexpected slowdown in non-farm payrolls in June, which surpassed analyst projections by a wide margin. This data eased concerns of a potential interest rate hike by the Federal Reserve, especially in light of the robust private payroll figures.
On the domestic front, the National Institute of Statistics and Geography (Inegi) reported that inflation in Mexico moderated in June for the fifth consecutive month, albeit less than anticipated. This data supports the view that Banxico will likely maintain its key rate at a stable level.
However, some experts caution against prematurely interpreting the job creation slowdown as a sign of a cooling off in the US labor market. CI Banco argues that while the market seems to be speculating on this notion, it is too early to draw definitive conclusions.
Despite the peso’s strong performance on Friday, the currency closed the week down by 2.88 cents relative to last Friday’s closing of 17.1156 units per dollar, equivalent to a 0.17 percent decrease. Nonetheless, the peso has seen an impressive improvement of 12.12 percent compared to the beginning of the year when it stood at 19.5089 units.
In conclusion, the Mexican peso rebounded against the weakening American dollar following disappointing US employment data. This surge was supported by the anticipation of stable interest rates in Mexico due to moderate inflation. However, caution is advised when assessing the significance of the US job market slowdown.