Deterioration of the Mexican peso observed after a disappointing US employment data release.
The Mexican peso experienced a depreciation on Friday morning, with the USD:MXN exchange rate reaching close to 19 pesos per dollar. This marks a weakening of more than 2% compared to its position a week ago.
The main factors behind this depreciation were the weaker-than-expected U.S. jobs report and disappointing remittance inflows to Mexico. The U.S. non-farm payrolls increased by only 73,000 jobs in July, signaling slower labor market growth that typically encourages a looser monetary policy from the Federal Reserve. This dynamic tends to lower the U.S. dollar’s strength relative to other currencies but initially caused uncertainty and peso depreciation amid shifts in global risk appetite.
Simultaneously, data published in Mexico showed that incoming remittances declined 16.2% annually in June to US $5.2 billion. This negative sentiment around the peso further contributed to its depreciation.
By Monday, August 4, 2025, the peso partially recovered yet still showed a slight decline against the dollar, closing at approximately 18.9069 pesos per dollar. Traders remained cautious ahead of important domestic inflation data and the Bank of Mexico’s monetary policy decisions. Despite this, Mexican consumer confidence reached a two-month high, which helped stabilize the peso by the end of the session.
It is worth noting that the 18.98 rate to which the peso depreciated early Friday represented a 2.3% depreciation for the currency compared to its closing position of 18.54 to the dollar last Friday. However, it is not as severe as its strongest position of 2024, which was 16.30 to the greenback.
Despite the recent depreciation, Mexico's currency has gained more than 10% against the greenback this year. The closing USD:MXN rate at the end of July was 11 centavos above the rate at the end of June.
Most US trade remains duty-free after Mexico secured a 90-day extension on President Donald Trump's most recent tariff threat. This extension likely played a role in mitigating the impact of the peso's depreciation on Mexican exports.
In conclusion, the peso’s depreciation on Friday was primarily due to the weaker U.S. jobs report increasing expectations of Fed rate cuts and disappointing remittance inflows to Mexico, combined with ongoing domestic economic uncertainties and external market conditions.
- The depreciation of the Mexican peso may have implications for businesses that rely on finance and investing in the region, as a weakened currency could potentially make their operations more expensive.
- The recent news regarding the peso's depreciation could impact investing decisions, as investors may now be closely monitoring the financial health of Mexican businesses and the moves by the Bank of Mexico with regards to monetary policy.
