Anna 
The USD/MXN pair is on a downward trajectory for the second consecutive day as it hovers near 17.13 ahead of the US Federal Reserve’s (Fed) interest rate decision. Key points from the analysis:
FOMC Interest Rate Decision: The Federal Open Market Committee (FOMC) is widely expected to maintain interest rates at 5.5%. However, the CME’s FedWatch Tool indicates a 43% chance of the Fed implementing the first rate cut in March. The uncertainty surrounding future rate cuts may be influencing the USD/MXN pair’s movements.
USD Strength Despite Treasury Yields: The US Dollar Index (DXY) is appreciating, displaying positive momentum despite subdued US Treasury yields. The DXY hovers around 103.50.
US Economic Indicators: Positive US economic indicators, including the JOLTS Job Openings and Housing Price Index, contribute to the overall strength of the US Dollar.
Upcoming US Employment Data: Investors are likely to closely monitor the US ADP Employment Change data for insights into the job market’s direction and health. The subsequent release of the US Nonfarm Payrolls report will offer a more comprehensive overview of employment trends.
Mexican Economic Data: The Mexican Peso (MXN) reacts positively to data from INEGI, indicating a 0.1% expansion in Mexican GDP for Q4 2023 on a quarter-on-quarter basis. However, this figure falls below expectations and the previous quarter’s expansion. On an annual basis, the preliminary GDP reading shows a rise of 2.4%, missing forecasts.
Inflation and Jobless Rate: Recent inflation data in Mexico suggests a resurgence, while the Mexican Jobless Rate indicates a contraction in the number of unemployed workers. Speculation arises that these economic indicators may deter the Bank of Mexico (Banxico) from considering an interest rate reduction in its February meeting.
The cautious tone prevails in the USD/MXN pair as traders await the outcome of the Fed’s decision and closely monitor economic indicators from both the US and Mexico. The potential for future rate cuts by the Fed adds an element of uncertainty to the currency pair’s movements.
