Strong appreciation of the Mexican peso! The dollar has been falling since 17.00 after the release of US employment data From Investing.com

Investing.com – The US has turned the corner and is back on track against the dollar, with the exchange rate falling below 16.90 for the first time this year after strong US labor market data beat expectations of a cooling restrictive monetary policy of the Federal Reserve System (FRS).

Around 10:00 Mexico City time, the dollar-to-Mexican peso exchange rate fell to 16.88 units. The local currency posted a notable 0.74% intraday gain, its biggest since mid-December, according to real-time data from Investing.com.

The Mexican peso thus erased losses recorded earlier in the session, when the US dollar traded above 17.00 as financial markets lowered expectations that the Federal Reserve could make its first rate cut. already in March.

Source: Investing.com

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Why is the Mexican peso rising amid US employment data?

It was announced this morning that the U.S. economy added 216,000 nonfarm payrolls in December, higher than the previous month and much higher than the 170,000 expected by economists consulted by Investing.com , which has accelerated contrary to all forecasts since the 173,000 observed in November (compared to 199,000 previously reported).

In terms of private non-farm payrolls, 164,000 jobs were created in December, higher than expected, while the unemployment rate remained at 3.7%, defying expectations that it would rise by a tenth .

“The strengthening of the peso is associated with the publication of the December employment report in the US, which turned out to be better than expected. The above is positive news for Mexico’s economic growth thanks to the close economic relations between both countries through exports,” said Gabriela Siller Pagaza, director of economic and financial analysis at Grupo Financiero Base.

The data also caused volatility in the currency’s rate, which tracks the currency’s evolution in a basket of six other major currencies. After reporting stronger job creation, the dollar rose above 103 points, its highest level since mid-December.

“The robust jobs report has caused operators to revise their forecasts for an early and significant interest rate cut by the Federal Reserve in 2024,” said Jeannette Quiros Zamora, director of economic, stock and equity research at Grupo Monex Financial.

However, at the time of writing, the dollar was down 0.31% and below its opening level of 102.10.

“As various employment data released this week have already shown that the labor market remains strong and is showing signs of weakening, rising wages could create additional inflationary pressure,” said Jorge Gordillo Arias, director of economic and equity research. at SIBanco.

Thanks to the momentum recorded this morning, the Mexican peso is back to levels seen in the last sessions of December and is on track to end the first week of 2024 around 0.4% higher.