Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone
– February 8, 2025 –
“The Mexican peso is experiencing a slight depreciation in Feb 7’s session, although it remains within a relatively narrow trading range against the dollar as markets weigh mixed labor data from the United States. Despite a decline in non-farm payroll creation in January, which came in at 143,000 jobs compared to the expected 170,000, the unemployment rate managed to drop to 4.0%, signaling that the U.S. labor market remains strong.
Additionally, the increase in hourly wages, which far exceeded expectations, stood at 0.5% monthly and 5.1% on an annualized basis, suggesting that this could complicate the continuation of the disinflationary trend. This may prompt the Federal Reserve to maintain a cautious stance, adding an element of complexity for emerging market assets such as the peso.
On the domestic front, recent inflation data in Mexico depict a more favorable outlook than anticipated, with an annual inflation rate of 3.59% and core inflation at 3.66%. These results, which came in below projections, are further supported by monthly inflation of 0.29% in the general index and 0.41% in the core index, placing inflation within the Bank of Mexico’s target range (2%-4%).
However, the recent decision by the Bank of Mexico to cut its benchmark interest rate by 50 basis points—in an effort to stimulate economic activity amid structural challenges—could exert additional pressure on the exchange rate in the short term. While this is a necessary normalization measure to support growth, it reduces the relative attractiveness of peso-denominated yields.
Looking ahead, the market will be closely watching the release of key economic indicators, including industrial production. In this regard, weak figures could increase volatility and trigger new selling pressures on the Mexican currency, whereas positive data could provide temporary relief for the MXN.”