Decline of the Mexican Peso Following Labor and Manufacturing Data in the U.S.
The Mexican peso lost value on Friday after data was released showing an increase in the unemployment rate in November in Mexico, which reinforces expectations that the central bank will continue to lower its interest rate throughout this year. In the United States, a positive report on the manufacturing sector was also released. In the afternoon, Fed Governor Adriana Kugler commented that the entity is facing significant uncertainty regarding the economic outlook for 2025, and decisions will be made based on the data received.
The national currency MXN= ended at 20.6190 per dollar, with a drop of 0.19% from Thursday's LSEG reference price, although in the morning it had seen a slight rebound of 0.27% to 20.5254 units. "The weakness of the peso is due to rising unemployment in the country, which supports the outlook for more interest rate cuts from Banco de México for 2025," explained Monex Grupo Financiero in an analysis. "For the overnight market, we anticipate that the peso will move in a range between 20.50 and 20.73," they added. The central bank had cut the interest rate by 25 basis points (bps) in December, marking the fifth reduction in 2024, and in its statement mentioned the possibility of more significant cuts during this year. In an interview with Reuters at the end of December, Deputy Governor Jonathan Heath considered that the board might weigh a reduction of up to 50 bps in the first meeting of the year, scheduled for February. The benchmark stock index S&P/BMV IPC .MXX fell by 1.62% to 48,957.24 points, with a trading volume of 112.8 million shares, below the daily average of over 200 million seen in recent months. Shares of tequila producer José Cuervo CUERVO.MX were the most impacted, dropping 4.85% to 22.37 pesos, followed by those of bottler and retailer FEMSA FEMSAUBD.MX, which decreased 4.58% to 167.67 pesos. In the secondary debt market, the yield on the 10-year bond MX10YT=RR increased by seven basis points, reaching 10.38%, while the 20-year rate MX20YT=RR rose by two points, settling at 10.61%.
The depreciation of the peso against the dollar in this context may indicate the vulnerability of the Mexican economy to internal factors such as unemployment. Such fluctuations in the currency can impact inflation and the purchasing power of citizens. It is crucial for Banco de México to maintain a monetary policy that strengthens economic stability and fosters sustained recovery in the labor market.
