Anna 
The Mexican Peso (MXN) maintained a relatively flat trajectory across most pairs on Thursday, following a rally observed on Wednesday. This pause comes in the wake of lower-than-expected Consumer Price Index (CPI) and Retail Sales data for April in the United States (US), which signaled a moderation in inflation and economic activity, thereby reshaping interest-rate expectations.
The data released suggests that the Federal Reserve (Fed) might lean towards lowering borrowing costs, a development that is negative for the US Dollar (USD) but generally favorable for the Mexican Peso.
As of the latest update, USD/MXN is trading near four-week lows at 16.71, while EUR/MXN stands at 18.18 and GBP/MXN at 21.19.
The Mexican Peso experienced a rebound, particularly against the USD and other major currencies, following the release of US CPI data that fell short of expectations. This outcome has raised the likelihood of the Fed implementing interest rate cuts sooner than previously anticipated, which tends to diminish foreign capital inflows and weigh on the USD.
The US headline CPI declined by 0.3% on a month-on-month (MoM) basis in April, below the consensus forecast of 0.4% and the 0.4% recorded in March, according to data from the US Bureau of Labor Statistics. The year-over-year (YoY) figure was in line with expectations at 3.4%, albeit lower than March’s 3.5%.
Moreover, the CPI excluding Food and Energy, which was anticipated to rise by 0.3% MoM, matched expectations but fell short of March’s 0.4%. On a YoY basis, this gauge decreased to 3.6%, in line with forecasts, down from the previous 3.8%.
US Retail Sales also reflected subdued consumer spending, reporting a flat reading of 0.0% in April, significantly below estimates of 0.4% and the downwardly revised 0.6% figure from the previous month, based on data from the US Census Bureau.
Following this data release, USD/MXN rose by almost one percentage point as investors adjusted their expectations regarding the future trajectory of US interest rates.
