Anna 
USD/MXN saw a pause in its two-day winning streak during early European trading on Thursday, likely influenced by an uptick in risk appetite and the prospect of multiple interest rate cuts in 2024. The U.S. dollar (USD) experienced a decline, primarily attributed to lower U.S. Treasury yields, resulting in USD/MXN dropping to around 16.95.
The World Bank revised its economic forecast for Mexico in 2024, projecting a higher-than-expected gross domestic product (GDP) growth rate of 2.6%, surpassing the original forecast of 1.9%. October witnessed a positive trend in total fixed income in Mexico, recording a 1.9% month-on-month increase, rebounding from a 1.5% decline in September.
Inflation data from Mexico for December presented a mixed picture, with both the 12-month inflation rate and the headline inflation rate rising. However, the increase in core inflation fell slightly below market expectations. Attention turns to industrial output data on Thursday, with market expectations leaning towards a potential slowdown in Mexican industrial activity.
Simultaneously, the U.S. dollar index (DXY) extended its losses for a second consecutive session, hovering around 102.20. The 2-year and 10-year yields were at 4.35% and 4.00%, respectively, at the time of the report.
Anticipation mounts for the release of U.S. Consumer Price Index (CPI) data for December later in the North American session. Projections indicate a 0.2% monthly increase and a 3.2% annual increase in CPI. Core inflation growth on a year-on-year basis is expected to ease to 3.8%, while month-on-month growth is likely to remain at 0.3%. These indicators hold substantial significance in gauging inflationary pressures and may significantly influence market expectations regarding the U.S. Federal Reserve’s monetary policy stance. The intricacies of these economic developments continue to shape the trajectory of USD/MXN and warrant close observation from market participants.
