- During the Friday session, the Non-Farm Payroll announcement was released, showing that the United States and it will 143,000 jobs during the month of January, as opposed to the expected 169,000.
- However, the internals were much more hawkish than that, and we have seen the US dollar gain as a result.
The USD/MXN pair has its own set of rules at the moment, which of course mainly has to do with the idea that the tariff situation could kick off again. At this point though, it seems like the Mexicans are willing to attempt to secure the border, and it’s probably worth noting that surveillance planes from the United States are now on the coast of Baja California, as well as the USS Nimitz, a nuclear powered aircraft carrier. In other words, it might actually be the beginning of the end of the spat for real. If that’s the case, then we begin to focus on the actual economy in both countries.
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The Federal Reserve is likely to remain put for most of the year, as inflation is still extraordinarily high. Because of this, the US dollar will probably retain quite a bit of its power, but at the same time we have the central bank in Mexico who has recently cut interest rates by 50 basis points, it looks like they will have to continue to cut multiple times this year. In fact, the interest rate is expected to drop down to 8% before it is all said and done.
In general, this is a market that I think stays somewhat range bound for the time being, but it probably favors the upside before it is all said and done. This is mainly due to the strength of the US economy, and of course the almost certain open warfare that the drug cartels may cause in Mexico as well. Nonetheless, it certainly looks like this is a pair that you continue to buy dips but take profit rather quickly.
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