In the early European hours on Tuesday, USD/MXN managed to break a three-day losing streak, edging higher and nearing the 17.00 mark. The ascent of the US Dollar (USD) was fueled by a prevailing sense of risk aversion among investors, who are gearing up for significant economic data releases from the United States (US) later in the week.
The spotlight turns to the upcoming release of the ISM Services PMI data on Tuesday, with expectations set at 53.0 for February, slightly below the previous figure of 53.4. Notably, concerns regarding inflation have somewhat subsided following the PCE Price Index meeting expectations.
Market participants are exhibiting caution, choosing to adopt a wait-and-see approach ahead of Federal Reserve (Fed) Chair Jerome Powell’s congressional testimony scheduled for Wednesday and Thursday. Investors seek additional insights into the potential trajectory of Federal Reserve rate cuts.
Remarks made on Monday by Atlanta Federal Reserve (Fed) President Raphael Bostic have drawn attention, particularly as he expressed uncertainty about achieving a soft landing. Bostic conveyed that while he does not anticipate consecutive rate cuts when they commence, he still expects two 25-basis point rate cuts in 2024.
Expectations in the market remain elevated for the Bank of Mexico (Banxico) to implement monetary policy easing in March, with investors anticipating a reduction of 75 basis points (bps) over the next six months. Banxico officials have underscored a measured approach to rate adjustments, emphasizing the importance of maintaining higher rates for an extended period.
Wednesday is set to bring Consumer Confidence data, followed by Thursday’s release of inflation data. The Mexican Peso (MXN) received support against the US Dollar (USD) following last week’s release of January’s labor numbers, where the jobless rate exceeded expectations, rising to 2.9% year-over-year from the previous 2.6%.
