The USD/MXN continues its winning streak, trading higher near 17.03 during the European session on Wednesday. The Mexican Peso (MXN) is under pressure as the US Dollar (USD) strengthens on risk-off sentiment. Market participants are reassessing the possibility of interest rate cuts by the Federal Reserve in the first quarter of 2024, prompting a return of investors towards the Greenback.
Key Factors Impacting USD/MXN:
Risk-Off Sentiment: The Mexican Peso weakens as the US Dollar gains ground amid risk-off sentiment. Investors are reconsidering the outlook for interest rate cuts by the Federal Reserve, contributing to a preference for the USD.
Mexican Economic Data: Recent data from Mexico reveals an increase in the Fiscal Deficit to 87.78 billion in November, a significant rise from the 29.58 billion recorded in October. The Jobless Rate remains stable at 2.7%, slightly below market expectations of 2.6%. However, the seasonally adjusted Jobless Rate experiences a minor uptick to 2.8% from the previous 2.6%, influenced by the higher policy rates maintained by the Bank of Mexico (Banxico).
US Dollar Index (DXY) Performance: The USD Index maintains its winning streak for the fourth consecutive session, supported by enhanced US Treasury yields. The 2-year and 10-year yields on US Treasury bonds stand higher at 4.34% and 3.96%, respectively.
Upcoming US Data: Investors are anticipated to closely monitor US economic data on Wednesday, including the December ISM Manufacturing PMI, November JOLTS Job Openings, and the Federal Open Market Committee (FOMC) Minutes, which could influence the USD/MXN pair.
Conclusion:
The USD/MXN pair’s extended winning streak is driven by a combination of risk-off sentiment, reconsideration of Fed rate cut expectations, and strong US Dollar performance. As investors remain vigilant, upcoming US economic data and the FOMC Minutes will likely play a crucial role in shaping the near-term dynamics of the USD/MXN pair. Traders should stay informed and adapt their strategies based on evolving market conditions.
