The USD/MXN pair continues its downward trajectory, hovering around 16.80 during Monday’s European session, fueled by a combination of mixed employment data from the United States (US) and a weakening sentiment surrounding the US Dollar Index (DXY). The negative outlook on the greenback is exacerbated by the growing anticipation of a Federal Reserve (Fed) rate cut in June.
The CME FedWatch Tool indicates a 73.8% probability of a rate cut in June, reflecting the dovish sentiment. Federal Reserve Chair Jerome Powell has hinted at potential cuts in borrowing costs later this year, contingent upon the inflation trajectory aligning with the Fed’s 2% target.
In February, the US Nonfarm Payrolls reported an addition of 275,000 new jobs, surpassing both January’s figure of 229,000 and market expectations set at 200,000. However, the US Average Hourly Earnings (YoY) witnessed a modest increase of 4.3%, slightly below both the estimated and previous reading of 4.4%. Investors are closely eyeing upcoming data releases, including the Consumer Price Index scheduled for Tuesday, along with Retail Sales and Producer Price Index data expected on Thursday.
On the Mexican front, the 12-Month Inflation rate recorded a 4.40% increase in February, signaling a decline from January’s seven-month high of 4.88%. Core Inflation posted a higher-than-previous increase of 0.49%, up from 0.40%. However, Headline Inflation rose by 0.9%, falling short of the anticipated 0.11% and the previous 0.89% increase.
Market participants are anxiously awaiting the Bank of Mexico’s (Banxico) policy meeting on March 21 for insights into the central bank‘s stance on monetary policy amidst these economic indicators and global uncertainties.
