The Day at a Glance | September 1 2023

*The US employment report logged greater job creation than what was expected by the market, although it remained below 200,000 positions per month. Additionally, wage revisions surprised to the downside, while the unemployment rate increased to its highest level in 18 months. 

*The Exchange Commission announced a reduction in the foreign exchange hedging program. 

*Commercial bank credit to the private sector recorded an annual expansion of 5.7% in real terms, marking 16 consecutive months of positive figures. 

*In China, August´s Caixin manufacturing PMI recorded a higher than forecasted reading (51.0 vs 49.0); it also set above July´s 49.2.   

*Former US President Donald Trump pleaded not guilty to charges of extortion in his attempt to interfere in the 2020 presidential elections in Georgia. This event marks the fourth occasion that the former president has declared himself innocent of criminal charges since the end of his term. 

*In Mexico, remittances for July will be made known today, along with the public sector experts’ survey conducted by the Central Bank of Mexico. A $5.561 billion figure is expected. 

Economic environment

Mixed data with a “weakening” tone in the US labor market. This Friday, the US Bureau of Labor Statistics released August´s employment report, which showed greater than expected job creation as a 187,000 figure was logged (vs 170,000 e.). However, positive surprise in non-farm payrolls was overshadowed by the increase in the unemployment rate, which reached its highest level since February 2022, at 3.8%, also reflecting an increase in the labor force participation rate to 62.8%. Additionally, wage revisions surprised to the downside with an 0.2% m/m increase from the previous 0.4% m/m and the 0.3% m/m expected by analysts, resulting in an annual 4.3% increase, down from the 4.4% y/y recorded in the previous month. Overall, these figures support the idea that the FED should consider carrying out a pause in the next monetary policy decision.

The Exchange Commission, composed of the SHCP and Banxico, has announced its decision to gradually reduce the foreign exchange hedging program. This resolution stems from the fact that the foreign exchange market has returned to normalcy, with sufficient liquidity and orderly functioning. Starting in September 2023, Banxico will roll over 50% of the maturities – only once and for a one-month period. Additionally, operations with an original term of six months will be rolled over for one month with 50% of the current amount, while operations with original terms of nine and twelve months will be allowed to expire without renewal. Lastly, the Commission reiterated that the value of the national currency is determined by free-floating in foreign exchange markets and commits to maintaining financial stability and the strong economic fundamentals that contribute to the healthy functioning of the foreign exchange market.