Ella 
USD/MXN continued its losing streak that started last Friday, with the Asian market falling to around 17.1300 on Thursday. USD/MXN is under downward pressure following the release of consumer price index (CPI) data from the United States.
U.S. inflation data showed overall U.S. inflation may be slowing, while core inflation, which strips out volatile components, remained relatively stable. Annual core inflation was in line with expectations at 4.3%, compared with the previous reading of 4.7%.
However, U.S. inflation rose to an annual rate of 3.7% in August, up from 3.2% in the previous month and higher than expected at 3.6%. Core inflation also rose on a monthly basis, rising to 0.3% from 0.2% in the previous month. The increase surprised markets, which had expected the index to be flat.
Investor expectations have increased that the U.S. Federal Reserve will remain on hold at its upcoming September policy meeting. The CME FedWatch tool shows the Fed is likely to keep interest rates in a range of 5.25% to 5.50% at its September meeting.
However, the chance of the Fed raising interest rates by 25 basis points in November remains at 40%, indicating growing expectations that the Fed will implement tightening monetary policy later this year. That suggests that while there may not be an immediate interest rate hike in September, investors expect the Fed to take such action in the near term.
The U.S. Dollar Index (DXY), which measures the U.S. dollar’s performance against a basket of six other major currencies, attempted to retreat after rising in the previous session. USD/MXN was trading lower at around 104.70 at press time.
The U.S. dollar index found upside support on Wednesday, largely due to an initial surge in U.S. Treasury yields. But then there was a pullback, with the 10-year U.S. Treasury yield at 4.23% at press time.
Market participants are currently focused on upcoming U.S. data, including August core producer price index (PPI) and retail sales data. These data will form an important indicator of U.S. economic activity.
This data can provide valuable signals about the state of the U.S. economy and can influence currency market sentiment, helping traders develop trading strategies when trading the USD/MXN pair.
