USD/MXN rebounds to 16.80 as risk-off sentiment prevails before US CPI release

USD/MXN stops its streak of losses ahead of the release of US inflation data on Tuesday.
Mexican Industrial Production figures for January are anticipated to show growth.
US CPI (Month-on-Month) is expected to see a slight uptick in February.
USD/MXN breaks its eight-day losing streak as market sentiment leans towards risk aversion ahead of the upcoming release of US inflation data. During the European trading session, the USD/MXN pair trades higher around the 16.80 mark.

Investors are expecting a modest increase in February’s US inflation data. A strong US Consumer Price Index (CPI) report could lessen the likelihood of an immediate interest rate cut by the Federal Reserve (Fed).

Mexico’s economic calendar includes the release of Industrial Production data for January, with forecasts suggesting a monthly growth of 0.4% and a year-on-year increase of 2.1%. Additionally, market participants are eagerly awaiting the Bank of Mexico (Banxico) policy meeting scheduled for March 21.

In January, the 12-month inflation rate in Mexico eased from a seven-month high, while Core Inflation saw an uptick compared to the previous increase. Headline Inflation came in below expectations and lower than the previous reading.

US Nonfarm Payrolls for February showed an increase in job additions compared to January and market forecasts. However, US Average Hourly Earnings (Year-on-Year) rose but remained below both estimated and previous levels.

Furthermore, Federal Reserve (Fed) Chair Jerome Powell hinted at potential cuts in interest rates sometime this year, contingent upon the inflation trajectory aligning with the Fed’s 2% target. According to the CME FedWatch Tool, there has been a slight decrease in the probability of a rate cut in June, currently standing at 68.9%.

USD/MXN