Anna 
During Wednesday’s European trading hours, the USD/MXN pair retraced its recent losses and trended higher, nearing the 16.80 mark. The US Dollar (USD) showcased strength, despite softer US Treasury yields, thereby bolstering the USD/MXN pair.
The US Dollar Index (DXY) surged towards the 104.00 level, supported by lower 2-year and 10-year yields on US Treasury bonds, currently at 4.67% and 4.27%, respectively. Investors keenly await the interest rate decision from the US Federal Reserve (Fed) scheduled for Wednesday.
The Federal Open Market Committee (FOMC) is widely anticipated to maintain the key federal funds interest rate within the range of 5.25% to 5.50%. According to the CME FedWatch Tool, the likelihood of a rate cut in May stands at 6.3%, while probabilities for rate cuts in June and July have risen to 59.2% and 76.0%, respectively.
In February, US Building Permits (Month-on-Month) exceeded expectations, surging to 1.518 million compared to the anticipated 1.495 million. Similarly, US Housing Starts (Month-on-Month) climbed to 1.521 million, surpassing market forecasts of 1.425 million.
On the Mexican front, Private Spending (Year-over-Year) observed a 5.1% increase in the fourth quarter of 2023, up from the previous 4.3% rise. However, the quarter-over-quarter report showed a modest 0.9% uptick, slightly below the previous 1.2% increase. Attention now turns to Retail Sales figures from Mexico scheduled for Wednesday.
In Banxico’s quarterly report, officials acknowledged progress in inflation control and emphasized the importance of avoiding premature interest rate cuts. The focus now shifts to the Bank of Mexico’s (Banxico) interest rate decision on Thursday, with market expectations leaning towards a 25 basis points reduction.
