Mexican peso weakens in light of strong US payroll report

After reaching its highest level against the US dollar in over eight years on Wednesday, the Mexican peso fell on Thursday morning.

According to Bloomberg, at 12 p.m. Mexico City time, one dollar was equivalent to 17.30 pesos.

In an ADP Research Institute's study on American incomes, June's numbers were the highest since February 2022. A few hours later, the peso started to lose value.

On Wednesday, the USD-MXN currency rate fell to a low of 16.98 pesos, but the dollar later marginally gained to settle at 17.01 pesos.

This morning, the dollar was stronger and the peso was weaker as a result of data released on Thursday that revealed that private payrolls in the United States climbed by 497,000 in June. The ADP Research Institute's favorable jobs report was the greatest since February 2022.

Gabriela Siller, director of economic analysis at Banco Base mentioned that "the peso depreciated today due to the strength of the dollar."

"The employment report from ADP was very strong and raises speculation about further hikes in interest rates in the US.", she added.

The "hawkish tone" of the Fed's minutes from its June monetary policy meeting, which were made public on Wednesday, and the ADP job statistics, according to CI Banco analysts, are exerting pressure on the peso.

On July 26, the US Federal Reserve will decide on the next interest rate. Currently, the federal funds rate in the US ranges from 5% to 5.25%.

One reason for the peso's current strength, according to analysts, is the Bank of Mexico's high benchmark interest rate, which is currently 11.25%, and the stark contrast between it and the Fed's rate.

After beginning 2023 at roughly 19.5 to the US dollar, the Mexican peso has increased dramatically this year.