Anna 
During Tuesday’s European session, the USD/MXN pair retraced its recent gains, depreciating to approximately 16.60. This decline is attributed to the strengthening of the Mexican Peso (MXN), supported by steady growth in Mexico’s manufacturing sector throughout March.
Notably, Mexican inflation has shown positive signs, with both headline and core measures increasing to 0.27% and 0.33%, respectively, in the first half of March. This development has enabled the Bank of Mexico (Banxico) to maintain tight borrowing conditions, aiming to mitigate ongoing inflationary pressures.
The headline S&P Global Mexico Manufacturing Purchasing Managers’ Index (PMI) for March registered a reading of 52.2, indicating continued improvement in the sector’s health compared to February’s 52.3. Although growth remained moderate, it outpaced the long-run trend, signaling resilience in Mexico’s manufacturing industry.
Despite positive data from the United States (US), including the unexpected expansion revealed by the ISM Manufacturing PMI for March, which rose to 50.3 from February’s 47.8, US Treasury bond yields surged. This surge limited the decline of the USD/MXN pair, as investors adjusted their expectations for a quarter-point interest rate cut by the Federal Reserve during its June meeting.
The US Dollar Index (DXY) has maintained its upward trajectory, extending its winning streak for the fifth consecutive session and currently trading around 105.00. This trend reflects market sentiment regarding the Federal Reserve’s monetary policy, with traders revising their expectations amidst improving economic indicators.
