The peso (9.94 vs. dollar), jobs and elections in Mexico
The peso closed the week with little change compared to the close of the previous week, showing an appreciation of 0.01% and trading around 19.94 pesos per dollar.
The exchange rate traded between a minimum of 19.9085 and a maximum of 20.2132 pesos, a level not seen since May 13.
During the week, the performance of the exchange rate was determined mainly by the performance of the US dollar against its main crosses, which closed the week with a moderate advance of 0.08 percent.
The mexican peso
The performance of the exchange rate can be divided into two parts.
During the first four sessions, the exchange rate faced upward pressure due to the publication of positive economic indicators globally and in the United States, which generated speculation that the Federal Reserve could adopt a less flexible monetary stance, since even the Fed signaled the possibility of beginning to discuss cuts to the bond purchase program.
The greatest upward pressure on the exchange rate occurred during the session on Thursday, with the publication in the United States of the ADP employment survey that estimated the creation of 978 thousand job positions, well above market expectations.
Likewise, the initial applications for unemployment support from the previous week were below 400 thousand for the first time since March 14, 2020 and the ISM for the services sector was at 64 points, a new record high.
The above took the exchange rate to the maximum in the week of 20.2132 pesos per dollar.
Laboral sector
Towards the end of the week, the peso losses were erased, after the non-farm payroll for May was published in the United States, which showed the creation of 559 thousand job positions, below market expectations for the second consecutive month.
It is important to note that the employment data for May does not change expectations about the future of the Federal Reserve’s monetary policy, as it is a positive indicator, since it indicates a sustained recovery in the labor market.
The recovery of the peso is mainly due to speculative adjustments in the foreign exchange market.
Other currencies
During the week, the most depreciated currencies were the Peruvian sol, which lost 1.13% and hit a record high of 3.8848 soles per dollar, and the Turkish lira with 1.12%, hitting a record high of 8.8008 lira per dollar.
The depreciation of the Peruvian sol is due to uncertainty prior to the presidential elections on Sunday, June 6, while the Turkish lira lost due to a lack of confidence in monetary policy due to the strong influence of the Erdogan government, who indicated that it was necessary. make interest rate cuts.
The performance of the exchange rate at the beginning of the following week will largely depend on the results of the federal elections in Mexico, mainly on the new structure of the Chamber of Deputies.
In the scenario that the party in charge of the executive branch and allies maintain an absolute majority, it is likely that additional upward pressures will be observed for the exchange rate and it is not ruled out that the exchange rate will return to levels close to 20.20 pesos per dollar .
On the week, the euro hit a low of 1.2104 and a high of $ 1.2254 per euro. For its part, the euro peso touched a minimum of 24.2297 and a maximum of 24.4703 pesos per euro.
At the close, interbank prices for sale were 19.9380 pesos per dollar, 1.4160 dollars per pound and 1.2167 dollars per euro.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.
Banco BASE
