After a two-day winning streak, the USD/MXN pair experiences a decline, attributed to an upswing in risk appetite as traders factor in the possibility of five rate cuts in 2024. The US Dollar (USD) faces headwinds from subdued US Treasury yields, with the USD/MXN pair trading lower around 16.95 during the early European session on Thursday.
Economic Projections and Indicators for Mexico:
The World Bank revises its economic projections for Mexico in 2024, anticipating a growth in the Gross Domestic Product (GDP) to reach 2.6%, surpassing the initial projection of 1.9%. October witnessed a rebound in Mexico’s Gross Fixed Income, with a month-on-month increase of 1.9%, bouncing back from the 1.5% decline observed in September.
December’s inflation data for Mexico presents a mixed scenario, with an uptick in 12-month inflation and Headline inflation. However, Core inflation grows slightly below market expectations. Market participants eagerly await Thursday’s Industrial Output data, anticipating potential insights into a slowdown in the production activities of Mexican industries.
Global Factors Influencing the USD:
The US Dollar Index (DXY) extends its losses for the second consecutive session, hovering around 102.20. Concurrently, the 2-year and 10-year US Treasury yields stand lower at 4.35% and 4.00%, respectively, at the time of writing.
Upcoming US Economic Data:
Later in the North American session, the release of the Consumer Price Index (CPI) data for December in the United States is anticipated. Projections suggest a potential increase in both monthly and yearly CPI figures, rising by 0.2% and 3.2%, respectively. Core inflation year-over-year could ease to 3.8%, while month-over-month remains steady at 0.3%. These economic indicators carry significant weight in assessing inflationary pressures and are poised to shape market expectations regarding the monetary policy stance of the US Federal Reserve. Traders and investors are closely monitoring these developments for potential impact on currency dynamics.
