- USD/MXN edges lower despite improved US Dollar on Wednesday.
- The Mexican Peso could depreciate as ING suggests a possible 25 basis points (bps) rate cut in March.
- The Greenback could face a challenge on subdued US Treasury yields.
USD/MXN retraces its recent gains and inches lower to near 17.05 during the European trading hours on Wednesday. However, the Mexican Peso (MXN) may face downward pressure as economists at ING suggest a possible 25 basis points (bps) rate cut in March, although the Bank of Mexico (Banxico) is expected to proceed cautiously in its rate-cutting cycle.
On Monday, Mexico's National Statistics Agency (INEGI) released the Indicator of Economic Activity (IOAE), indicating a 0.7% month-on-month contraction in the economy, despite a 1.3% year-on-year growth. Additionally, Retail Sales data for December is expected to be released on Wednesday.
The US Dollar Index (DXY) holds steady at around 104.10 after recovering intraday losses. The decline in the US Treasury yields pulls back the US Dollar (USD), which in turn, undermines the USD/MXN pair. The 2-year and 10-year yields on US Treasury coupons stand at 4.59% and 4.26%, respectively, at the time of writing.
The US Federal Reserve is expected to maintain elevated policy rates for an extended period to address persistent inflation concerns, particularly in light of last week's strong consumer and producer prices data from the United States (US).
The prospect of higher interest rates is likely to dampen economic activity in the United States (US), potentially impacting company profits. As a result, investors are turning toward the US bond market, causing prices of US Treasury coupons to rise and pulling yields downward.
Traders are eagerly awaiting the release of the Federal Open Market Committee (FOMC) Minutes later in the North American session to gain further insights into the Federal Reserve's interest rates trajectory.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD flirts with daily tops near 1.0730
The continuation of the selling pressure in the Greenback now lends further oxygen to the risk complex, encouraging EUR/USD to revisit the area of daily highs near 1.0730.
USD/JPY looks stable around 156.50 as suspicious intervention lingers
USD/JPY remains well on the defensive in the mid-156.00s albeit off daily lows, as market participants continue to digest the still-unconfirmed FX intervention by the Japanese MoF earlier in the Asian session.
Gold advances for a third consecutive day
Gold fluctuates in a relatively tight channel above $2,330 on Monday. The benchmark 10-year US Treasury bond yield corrects lower and helps XAU/USD limit its losses ahead of this week's key Fed policy meeting.
Week Ahead: Bitcoin could surprise investors this week Premium
Two main macroeconomic events this week could attempt to sway the crypto markets. Bitcoin (BTC), which showed strength last week, has slipped into a short-term consolidation.
Five Fundamentals for the week: Fed fears, Nonfarm Payrolls, Middle East promise an explosive week Premium
Higher inflation is set to push Fed Chair Powell and his colleagues to a hawkish decision. Nonfarm Payrolls are set to rock markets, but the ISM Services PMI released immediately afterward could steal the show.