The Mexican Peso (MXN) experienced a slight depreciation against the US Dollar (USD) on Friday, resulting in minimal weekly losses of 0.17%. The USD/MXN pair traded at 17.05, up by 0.09% at the time of writing. This comes amidst high inflation in the United States and cautiously optimistic remarks from Federal Reserve speakers regarding potential rate cuts, emphasizing the need for patience.
Looking ahead, Mexico’s economic calendar is set to gain momentum with the release of Retail Sales and final Gross Domestic Product (GDP) figures for Q4 2023. Market participants are particularly focused on the February inflation report, as the Bank of Mexico (Banxico) eyes the potential start of its easing cycle.
USD/MXN traders took cues from the US Producer Price Index (PPI) for January, which exceeded expectations. Additionally, Consumer Sentiment in the US continued to improve. Federal Reserve officials, including Atlanta Fed President Raphael Bostic and San Francisco Fed President Mary Daly, emphasized the importance of patience and agile response in light of evolving economic conditions.
In the broader market context, the USD/MXN pair reacted to the US Bureau of Labor Statistics (BLS) data, with the January PPI witnessing an increase, surpassing expectations. The core PPI, excluding volatile food and energy prices, also rose significantly. The Consumer Sentiment index improved slightly, while inflation expectations remained steady.
Despite the economic data, the USD/MXN pair stabilized near its current exchange rate after an initial surge in response to the US data release. Market players are anticipating the first rate cut by the Federal Reserve in June, adjusting odds for March and May.
The technical analysis suggests that the USD/MXN pair has been consolidating within a specific range, hovering near the 50-day Simple Moving Average (SMA) at 17.09. Traders are closely watching key levels, with the pair potentially testing the psychological 17.00 figure if it breaks below 17.05. Conversely, a reclaim of the 50-DMA could signal a rally towards higher levels, aiming for the 200-day SMA at 17.29 and the 100-day SMA at 17.39.
As Banxico revises its inflation expectations upward, the USD/MXN pair remains resilient despite posting minor losses, with the overall market sentiment influencing its trajectory.
