Anna 
The USD/MXN pair continues its three-day losing streak, trading around 17.03 during the European session on Wednesday. The Mexican Peso (MXN) gains strength against the US Dollar (USD), driven by the decrease in US Treasury yields, creating a headwind for the USD/MXN pair.
The US Dollar Index (DXY) remains in a downward trend, edging lower to near 104.10. The 2-year and 10-year yields on US bond notes stand at 4.40% and 4.10%, respectively, contributing to the Greenback’s bearish momentum. However, the extent of the USD’s decline is somewhat curbed by the hawkish comments from US Federal Reserve (Fed) Chair Jerome Powell. Powell’s remarks have tempered market expectations of an imminent rate cut in March.
Wednesday brings the release of Mexican Consumer Confidence data by INEGI, along with inflation data. The Bank of Mexico (Banxico) is set to announce its interest rate decision, with Core Inflation expected to ease to 0.37% in January. In contrast, Headline Inflation is projected to rise by 0.88%. The 12-Month Inflation forecast stands at 4.88%, surpassing the previous growth of 4.66%.
Market expectations anticipate Banxico maintaining its interest rate at 11.25% in February, with a quarter-basis point rate cut expected in March. Further predictions suggest an escalation in the scale of rate cuts by Banxico throughout 2024. The combination of these factors contributes to the USD/MXN pair’s ongoing decline.
