Anna 
The USD/MXN currency pair is experiencing downward pressure, primarily influenced by a subdued US Dollar (USD) amid a risk-on sentiment and lower US Treasury yields. During the European session on Thursday, the pair edged lower to near 16.90, with the US Dollar Index (DXY) trading around 103.30.
Federal Reserve (Fed) Chair Jerome Powell’s comments on the possibility of rate cuts in 2024 contributed to challenges in US Treasury yields. Powell, while testifying before the House Financial Services Committee, mentioned the potential for rate cuts but emphasized the need for higher assurance that inflation is consistently progressing towards the 2% target before implementing such measures.
Weaker employment data from the United States further added to the downward pressure on the US Dollar (USD). The February US ADP Employment Change, reported at 140K, slightly missed expectations of 150K but marked an improvement from the previous month’s figure of 111K.
On the Mexican side, INEGI released Consumer Confidence data for February, showing a slight decrease to 47.1 from 47.6. Traders are awaiting February’s inflation data, with expectations of a slowdown in headline inflation, projected to increase by 0.11% compared to the previous rise of 0.89%.
Economists at CIBC Capital Markets anticipate a rise in the USD/MXN pair, attributing it to the divergence between the Bank of Mexico (Banxico) and the Federal Reserve. With Banxico indicating a potential rate cut in March and maintaining a trajectory towards achieving the 3% inflation target, they project successive rate reductions beginning next month, with an expected overnight rate of 9.25% by year-end.
