The Mexican peso strengthened to near 17.19 per dollar on Friday, marking its strongest level in three weeks, as the dollar weakened despite stronger-than-expected U.S. jobs data. The USD/MXN pair fell from 17.32 to a three-week trough close to 17.19 before settling near 17.21.
The 17.20 level has become a key support point for traders, with buyers stepping in at that level for the third consecutive session, according to Banco Base. The peso's gains were part of a broader dollar pullback that also saw the Norwegian crown, Hungarian forint, and Chilean peso outperform.
Banxico Cuts Rates, Signals End of Easing Cycle
Banco de México trimmed its overnight interbank rate by 25 basis points to 6.50% on Friday, marking the end of its easing cycle that began in March 2024. The central bank noted that inflation has eased to 4.45%, with core inflation at 4.26%.
U.S. Jobs Data and Market Reaction
The U.S. Bureau of Labor Statistics reported that nonfarm payrolls rose by 115,000 in April, with unemployment steady at 4.3%. Hiring was led by health care, transportation and warehousing, and retail, while federal government payrolls continued to decline.
Despite the stronger jobs data, the dollar index (DXY) slipped 0.3% to 97.90, as Treasury yields fell and U.S. equities climbed. Analysts offered mixed views: Robert Pavlik at Dakota Wealth called the data "not gangbusters," while Tim Holland at Orion Advisor Solutions saw "no compelling case for Fed rate cuts." Peter Cardillo of Spartan Capital argued the Fed's focus would remain on inflation.
Global Factors and Technical Outlook
The peso benefited from a global risk-on mood, with hopes for easing U.S.-Iran tensions putting the dollar on the defensive. Technical analysis suggests that if the DXY breaks below 97.63, it could target 96.5 and 95.55, while a rebound above 99.10 would signal renewed dollar strength.
Yahoo Finanzas noted the peso's dollar-driven push, with USD/MXN trading near 17.2122 on the 15-minute chart and showing a bearish tilt for the dollar. Mexico's consumer confidence index ticked up 0.2 points to 44.4 in April, though it remains 1.1 points below last year's level.
Key Levels and Market Implications
Gabriela Siller, head of economic analysis at Banco Base, told El Financiero that while the exchange rate has broken decisively through 17.30, it is unlikely to cement a spot below 17.20 "as long as the war persists." Any negative turn in Middle East news or a defense by dollar buyers at that threshold could halt the peso's climb.
If USD/MXN holds below 17.20 through the close, traders may quickly turn their attention to the year's low near 17.08. However, if it fails again, expect traders to lean into buying dollars on any uptick instead of pressing bets on more peso gains.
