Daily digest market movers: Mexican Peso on the back foot following soft US data
- Mexico’s Gross Fixed Investment in February rose 0.2% MoM, exceeding estimates of 0% and January’s 0.1% increase. On an annual basis, investment missed forecasts of 2.1%, dipping to 1.6% from 2.5%.
- Mexico’s Private Consumer Spending rose by 0.6% MoM in real terms. Annually, spending grew 3.9% in non-seasonally adjusted terms.
- Last week, Banxico Governor Victoria Rodriguez Ceja said the central bank would be data-dependent. However, weak GDP data could lead to a “live meeting” on May 9.
- The US Nonfarm Payrolls came in at 175K, below the consensus of 243K and trailing March’s revised 315K figure. Further data showed the Unemployment Rate ticked up from 3.8% to 3.9%, while Average Hourly Earnings (AHE) missed the 0.3% estimate to 0.2%.
- The ISM April Services PMI dipped below the 50.0 expansion/contraction threshold and came at 49.4, beneath projections and March’s reading. Digging deep into the report, the Employment subcomponent cooled, while Prices Paid increased. This could prevent the Federal Reserve from cutting rates as inflation seems to be reaccelerating.
- On Wednesday, the Fed decided to keep the fed funds rate unchanged at 5.25%-5.50 %. They acknowledged that risks to achieving the Fed’s dual mandate on employment and inflation “moved toward better balance over the past year.” Although they said there’s progress on inflation, recent data shows that it has stalled.
- Fed policymakers said they would reduce the rate of shrinking its balance sheet beginning in June. This will be done by lowering the cap from $60 billion to $25 billion for the amount of Treasury maturities not reinvested every month.
- Data from the Chicago Board of Trade (CBOT) suggests that traders expect the fed funds rate to finish 2024 at 5.045%, unchanged compared to Thursday.
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