The USD/MXN pair is trading lower near 16.92 during the European hours on Tuesday, marking a reversal after two days of profits. The Mexican Peso (MXN) has recovered recent losses against the US Dollar (USD) amid improved risk sentiment.
Key economic data from Mexico includes the Fiscal Balance in Pesos for November, revealing a deficit of 87.78 billion, significantly higher than October’s 29.58 billion. Meanwhile, the Jobless Rate remained stable at 2.7%, slightly below market expectations, but the seasonally adjusted Jobless Rate experienced a minor uptick to 2.8%. These figures may offer some relief to the Bank of Mexico (Banxico) regarding the need for further monetary policy tightening, potentially easing pressure on the Mexican Peso (MXN).
Conversely, the US Dollar (USD) has received initial support in the new year, with the US Dollar Index (DXY) nearing 101.50. Signs of a slowing US economy in the last quarter of 2023, reflected in declining US labor data, Core PCE Inflation, and GDP Annualized, strengthen the case for potential Federal Reserve (Fed) rate cuts in early 2024. This anticipation exerts negative pressure on the USD, contributing to the downward trend in the USD/MXN pair.
Additionally, the recent Chicago Purchasing Managers Index, showing a significant reduction in business conditions in the Chicago region, further supports the case for potential Fed rate cuts. Looking ahead, investors will closely watch ISM Manufacturing PMI figures and the Meeting Minutes from the Federal Open Market Committee (FOMC) scheduled for release on Wednesday, which could have notable impacts on market sentiment and expectations.