The Mexican peso depreciated to well above 19 to the US dollar on Friday morning after official data showed that hiring in the United States slowed significantly in July.
The peso declined to as low as 19.16 to the greenback early Friday, according to Bloomberg data.
At 10 a.m. Mexico City time, the peso was trading at 19.00 to the US dollar.
Compared to its closing position of 18.86 to the dollar on Thursday, the peso depreciated around 1.6% to reach 19.16. That position represents a depreciation of 14.9% compared to the peso’s strongest level this year — 16.30 to the dollar in April.
The currency’s depreciation on Friday came after the United States Bureau of Labor Statistics reported that “non-farm payroll employment edged up by 114,000” in the U.S. in July and unemployment increased from 4.1% to 4.3%, the highest level since October 2021.
Job creation declined 36.3% compared to June. The consensus forecast of economists surveyed by Bloomberg was that 175,000 jobs were added in the United States in July.
The weaker-than-expected data increased bets that the United States Federal Reserve will cut interest rates in September.
“Traders are now pricing in a 71% probability that the Fed will cut rates by 50 basis points in September, up from 31% before the data was released,” Reuters reported.
On the X social media site, Janneth Quiroz, the Monex financial group’s director of economic analysis, noted that the peso was affected by a “weak employment report” in the United States.
The July employment numbers and separate data showing that manufacturing activity in the United States dropped to its lowest level since November last month are generating fear that an economic slowdown in the U.S. could become more pronounced, Quiroz said.
A slowdown in the U.S. could negatively affect Mexico’s economy and reduce the inflow of dollars to Mexico due to “lower exports, remittances and foreign direct investment,” the analyst wrote.
As the Mexican peso depreciated against the US dollar on Friday morning, the greenback lost ground against other major currencies. The DXY index, which measures the value of the greenback against a basket of foreign currencies, was down more than 1% shortly after 10 a.m.
CI Banco analysts said in a note that investor sentiment has significantly deteriorated due to fears of a recession in the United States.
Peso now weaker than in the election aftermath
Other factors have recently weighed on the peso, most notably the comprehensive victory of Claudia Sheinbaum and the ruling Morena party in the June 2 elections in Mexico.
The peso depreciated to as low as 18.99 to the dollar 10 days after the elections on concerns that a coalition led by Morena will approve a range of constitutional reform proposals — including a controversial judicial reform proposal — once recently-elected lawmakers assume their positions on Sept. 1.
Morena, the Labor Party and the Ecological Green Party of Mexico will have a supermajority in the lower house of Congress, allowing it to approve constitutional reform proposals without the need to court opposition support. However, it will need a few additional votes to get such proposals through the Senate.
Sheinbaum will be sworn in as Mexico’s first female president on Oct. 1.
Mexico News Daily
The biggest reason for the fall of the peso has been the reversal of the yen carry trade. Check the JPY.
It’s all related. But, the peso shouldn’t drop too much more since abound 90% of the unwind has occurred
It was at 19.80 about 15 mins ago.
The peso is much stronger than Tijuana and Tecate.
The “peso” is not stronger than “Tiguila” and “Tecate” and besides, you can’t eat paper “(the peso”). The value of the peso’ is going to “hell”. Watch out Mexico economy. What are you going to do to stop the “bleeding? of the “peso”. “I mama” , no se?
The peso goes up, the peso goes down. Good for extrañeros ATM users in Mexico but bad for importing inflation.
One would think that bad news in the US would strengthen the peso because it’s in the US