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Mexican Peso Finds Relief Amid Better Labor Data and a Weakening Dollar

December 3, 2024 (Investorideas.com Newswire) Investorideas.com, a go-to platform for big investing ideas releases market commentary from Quasar Elizundia, Expert Research Strategist at Pepperstone

"The Mexican peso is up by 0.2% during the session, supported by a combination of domestic and international factors that provide the currency with a brief respite, though challenges remain on the horizon.

Domestically, the Mexican economy delivered a positive surprise by reporting a decrease in the unemployment rate, which fell to 2.5% in October from 2.9% the previous month, its lowest level since March. According to data from INEGI, the number of unemployed individuals dropped by 142,000 compared to last year, while the economically active population increased by 317,000, reaching 61.4 million. This performance reinforces the perception of a stronger labor market but also highlights challenges such as a 9.4% underemployment rate and high informality, affecting 54.1% of the workforce.

On the external front, the U.S. dollar is giving up part of its early-week gains following comments by President-elect Donald Trump about possible tariffs on BRICS countries if they continue pursuing de-dollarization, which caused market volatility and exerted pressure on the MXN.

Operationally, the MXN has previously faced significant pressure due to political and trade uncertainty linked to the United States, where Donald Trump's protectionist stances are beginning to outline a more challenging scenario for Mexico.

While the peso's positive performance today has been welcomed, it is crucial to emphasize that significant risks remain. The Mexican economy continues to grapple with moderate growth and inflation, which, although relatively contained, still causes market uncertainty.

Looking ahead, traders are focused on the U.S. Non-Farm Payrolls (NFP) data to be released later this week. Any outcome exceeding the 200,000-job average expected could exert renewed pressure on the MXN."

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