Mexico’s adjusted unemployment rate stayed at 2.6% in August, unchanged from July. The information here includes forward-looking statements with potential risks and uncertainties. It’s important to do your own research before making investment decisions.

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Mexico’s Strong Labor Market

That Mexico’s jobless rate remains low at 2.6% for August supports the view of a strong labor market. This stability gives the Bank of Mexico, or Banxico, little reason to cut interest rates aggressively soon. This suggests that the central bank will continue its careful approach to fighting inflation. Unemployment has stayed below 3% for much of 2023. With core inflation remaining stubbornly above the bank’s target, unlike the higher 4.8% levels seen in 2024, policymakers will likely focus on currency stability. Thus, maintaining a high policy rate is key to their strategy. For derivative traders, the interest rate difference between Mexico and the U.S. strongly influences the peso. With Banxico’s rate expected to remain around 9.75%, the carry trade in the USD/MXN pair looks appealing. This environment indicates that selling volatility on this pair may be a smart move, as the fundamentals limit the risk of a sharp peso drop. In the upcoming weeks, it will be important to pay close attention to statements from the U.S. Federal Reserve along with those from Banxico. Any indication that the Fed may postpone its rate cuts could narrow the interest rate gap, potentially making the peso less attractive. Therefore, using options to hedge against sudden changes in U.S. monetary policy might be wise. Create your live VT Markets account and start trading now.

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