Anna 
USD/MXN continues its downward trajectory for the second consecutive session, edging lower to around 17.10 during the early European session on Tuesday. The decline in the US Dollar (USD) is attributed to the subdued US Treasury yields, exerting pressure on the USD/MXN pair.
The upcoming presidential election on June 2nd is anticipated to result in Claudia Sheinbaum of the Morena party assuming victory. Market analysts predict a gradual depreciation of the Mexican Peso (MXN), driven by anticipated uncertainties surrounding the economic policies of the incoming administration.
Analysts also project a 25 basis points rate cut starting in March, with expectations of a subsequent increase in the scale of rate cuts by the Bank of Mexico (Banxico) later in 2024.
December’s Producer Price Index (PPI) Year-on-Year reported a decline of 10.6%, slightly below the anticipated decrease of 10.5% and the previous figure of 8.8%. Meanwhile, US ISM Services Prices Paid increased to a reading of 64.0 in January, up from December’s reading of 56.7.
Over the weekend, Federal Reserve Chair Powell remarked that it was premature to ease policy, emphasizing the ongoing task of steering inflation toward its 2% target. He added that the Federal Reserve might consider its first rate cut around the middle of the year.
Market participants will closely observe speeches from Federal Reserve officials for additional insights into potential adjustments to monetary policy. On the Mexican front, the release of Consumer Confidence data scheduled for Wednesday will be closely watched for indications of the economic outlook in Mexico. Traders are advised to monitor these developments for potential impacts on USD/MXN movements.
