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- The Mexican Peso (MXN) is in a state of flux, dropping 0.08% against the US Dollar (USD) due to a mix of factors including continued US economic growth and conflicting signals from Mexico.
- The US GDP for Q4 2023 showed strong growth and stable Durable Goods Orders, which could impact the Fed’s rate decisions, while the labor market is showing signs of cooling down.
- In Mexico, a lower unemployment rate and rising inflation are presenting challenges for Banxico’s policy direction.
The Mexican Peso (MXN) saw minimal gains against the US Dollar (USD) on Thursday, in light of continued US economic growth and mixed signals from Mexico. The US economy is growing above trend, potentially impacting the Federal Reserve’s (Fed) rate decisions and inflation concerns. Meanwhile, Mexico is facing challenges with its unemployment rate and rising inflation, which could impact Banxico’s policy direction. At the moment, the USD/MXN trades at 17.22, down 0.02% on the day.
With the US economy showing strong growth above expectations, and the potential for reacceleration of inflation, the Federal Reserve may decide against interest rate cuts in the near future. In Mexico, the unemployment rate has decreased, but rising inflation may deter the Bank of Mexico (Banxico) from easing policy.
Daily Digest Market Movers: Mexican Peso at cross-roads following solid US data
- US GDP for Q4 2023 rose by 3.3% QoQ, smashing estimates of 2%, but less than Q3’s 4.9% increase, according to the US Bureau of Economic Analysis . In 2023, Real GDP rose by 2.5%, sponsored by “increases in consumer spending, nonresidential fixed investment, state and local government spending, exports, and federal government spending,” revealed the report.
- Meanwhile, Durable Goods Orders were unchanged in December, with figures clocking 0%, lower than November’s 5.5% rise due to a slump in transportation equipment manufacturing according to the US Department of Commerce.
- The US Bureau of Labor Statistics reported that Initial Jobless Claims rose to 214K for the week concluding on January 20, surpassing both the prior week’s figures and the projected 200K.
- In Mexico, the Unemployment Rate slowed from 2.7% to 2.6% in December as expected by analysts, according to the National Statistics Agency (INEGI).
- Mid-month inflation in Mexico increased by 0.49%, higher than the anticipated 0.38% but lower than December’s 0.59%, while core prices matched expectations at 0.25%.
- Annually, general inflation in Mexico rose 4.9%, above forecasts, and the prior month’s 4.46%, while core inflation cooled from 5.19% to 4.78%, as foreseen.
- Economic Activity in November shrank -0.5% on a monthly basis, lower than forecasts and October’s -0.1% contraction. Annual figures dropped from 4.2% to 2.3%, below forecasts of 3.2% growth.