Mexican Peso counterattacks amid resilient job market shrugs off upbeat US GDP

• Mexican Peso (MXN) trims recent losses against the US Dollar (USD) after a weak start.
• Mexico's Unemployment Rate for September aligns with estimates, dipping to 2.9% from August's 3%.
• Banxico's Deputy Governor Jonathan Heath highlights concerns over the desynchronization between monetary and fiscal policy in 2024.

Mexican Peso (MXN) climbs against the US Dollar (USD) on Thursday, trimming some of the last two days' losses after economic data from Mexico showed the labor market remains tight, portraying a resilient economy. Across the border, the United States (US) economy reported its fastest GDP growth rate in almost two years during the third quarter, a bad sign for inflation, which could justify the US Federal Reserve (Fed) need for further tightening. The USD/MXN is trading at 18.20, down 0.66% on the day.

Mexico revealed the Unemployment Rate for September slowed compared to August’s 3% figure, and data was aligned with estimates of 2.9%, informed the National Statistics Agency, INEGI. Aside from economic data, the Bank of Mexico (Banxico) Deputy Governor Jonathan Heath said the desynchronization between monetary and fiscal policy due to the government's increasing debt in 2024 will add “noise” to the inflationary fight.

On the US front,  Q3 GDP grew above expectations, while Durable Goods Orders for September more than tripled forecasts. On the other hand, Initial Jobless Claims rose above forecasts, suggesting the labor market is easing.

Daily Digest Market Movers: Mexican Peso comes back to life as the USD/MXN drops below 18.30

• Mexico’s September Unemployment Rate was 2.9%, aligned with estimates, but below August’s 3%.
• US Q3 GDP grows at an annualized rate of 4.9%, higher than the 4.2% consensus.
• Durable Goods Orders for September in the US rose 4.7% MoM, crushing forecasts of 1.5%, well above August’s 0.1% plunge.
• US Initial Jobless Claims for the week ending October 21 rose to 210K, exceeding estimates and prior week data of 208K and 200K, respectively.
• On October 24, Mexico's National Statistics Agency INEGI reported annual headline inflation hit 4.27%, down from 4.45% at the end of September, below forecasts of 4.38%.
• Mexico’s core inflation rate YoY was 5.54%, beneath forecasts of 5.6%.
• Earlier this week, S&P Global Manufacturing PMIs evidenced expansion in US manufacturing and service sectors during October.
• On Friday, the US will release September's Core PCE Price Index – Federal Reserve's preferred gauge of inflation – which could affect monetary policy expectations.
• The Bank of Mexico (Banxico) held rates at 11.25% in September and revised its inflation projections from 3.50% to 3.87% for 2024, above the central bank’s 3.00% target (plus or minus 1%).

Technical Analysis: Mexican Peso at the brink of further depreciation if USD/MXN climbs above 18.50

The USD/MXN upward bias remains intact, though Thursday’s price action led to a daily high of 18.42 but the pair failed to break last week’s high at 18.46, exacerbating the ongoing pullback to current exchange rates. If sellers want to re-test the psychological 18.00 figure, they must reclaim the 20-day Simple Moving Average (SMA) at 18.06. On the other hand, if the pair finds support at around 18.20, that could keep buyers hopeful of challenging October’s high 18.48, ahead of 18.50.