Ella 
USD/MXN ended its two-day winning streak on a weaker U.S. dollar, trading around 17.30 during the European session on Friday, amid falling U.S. Treasury yields. The possibility of the Federal Reserve ending its interest rate hikes dragged down U.S. yields. Additionally, the U.S. dollar (USD) may have found support in recent U.S. data.
The U.S. core personal consumption expenditures price index (PCE) slowed to a monthly rate of 3.5% in October, down from the previous reading of 3.7%. On the labor market front, initial jobless claims for the week ended Nov. 24 came in at 218,000, slightly below expectations of 220,000. These indicators provide insight into U.S. inflation trends and the health of the labor market.
The latest economic data from Mexico included a lower-than-expected annual unemployment rate of 2.7%, down from expectations of 2.8% and September’s 2.9%. Additionally, the fiscal balance sheet in October witnessed a sharp decline in the fiscal deficit to $29.58 billion from $132.56 billion previously.
In a quarterly report released on Wednesday, Mexico’s Bank of Mexico (Banxico) raised its economic growth forecast for 2023 and 2024. The bank expects inflation to take longer to reach target, with the 3.0% target expected to be reached by 2025. Governor Victoria Rodriguez Ceja is open to the possibility of a rate cut, which is expected to be discussed in the first quarter of 2024.
The upcoming release of the U.S. ISM Manufacturing Purchasing Managers’ Index for November and a speech by U.S. Federal Reserve Chairman Jerome Powell scheduled for Friday will be significant for market dynamics. Investors will be keeping a close eye on these events as they have the potential to play a key role in determining the direction of USD/MXN.
