Anna 
During Monday’s European session, the USD/MXN pair hovers around 16.70, marking its third consecutive day of gains. The US Dollar (USD) has benefited from market caution ahead of the US Federal Reserve’s interest rate decision scheduled for Wednesday.
Despite facing downward pressure due to a correction in US Treasury yields, the USD has remained resilient. The US Dollar Index (DXY) maintains its position around 103.40, while the 2-year and 10-year US Treasury yields stand at 4.71% and 4.29%, respectively. Recent rises in yields are attributed to a prevailing hawkish sentiment surrounding the Federal Reserve, which is expected to maintain its elevated interest rates amidst recent inflationary pressures.
In economic developments, the preliminary US Michigan Consumer Sentiment Index for March declined to 76.5, contrasting with expectations of remaining steady. However, February’s Industrial Production (MoM) edged up by 0.1%, surpassing expectations and recovering from the previous month’s decline.
On the Mexican side, Industrial Production surged by 2.9% over twelve months, signaling improvement from December’s stagnant performance. This may strengthen the hawkish stance of the Bank of Mexico (Banxico).
In Banxico’s quarterly report, officials noted progress in inflation control and emphasized the importance of avoiding premature interest rate cuts. Governor Victoria Rodriguez Ceja advocates for a gradual approach to adjustments, while Deputy Governor Jonathan Heath cautions against the risks of premature rate cuts.
Traders will closely monitor the release of Private Spending Retail Sales and Inflation data throughout the week. Additionally, Banxico’s interest rate decision, scheduled for Thursday, will be a focal point for market participants.
