USD/MXN loses ground near 17.30 on possible ending of Fed’s rate hikes

• USD/MXN faces challenges to the subdued sentiment around the Fed’s rate trajectory.
• The likelihood of ending the Fed’s rate hikes puts pressure on the US bond yields.
• Mexico’s Jobless Rate eased to 2.7% from 2.9% prior.
• Banxico anticipated inflation to reach its 3.0% target by 2025.

USD/MXN snaps a two-day winning streak on the back of the weaker Greenback amid downbeat US Treasury yields, trading around 17.30 during the European session on Friday. The likelihood of ending the interest rate hike by the Federal Reserve drags the US yields downward. Furthermore, the US Dollar (USD) might have found support in recent US data.

The US Core Personal Consumption Expenditures Price Index (PCE) showed a month-on-month easing to 3.5% in October, a decrease from the previous reading of 3.7%. In the labor market, Initial Jobless Claims for the week ending November 24 totaled 218K, slightly below the anticipated 220K. These indicators provide insights into inflation trends and the labor market’s health in the United States (US).

Mexico’s economic updates include a lower-than-expected Jobless Rate at 2.7% YoY, below forecasts of 2.8% and September’s 2.9%. Additionally, the Fiscal Balance for October witnessed a significant decline in the fiscal deficit, dropping to 29.58B from the previous 132.56B.

In its quarterly report released on Wednesday, the Bank of Mexico (Banxico) revised its economic growth forecasts upward for 2023 and 2024. The bank anticipates that inflation will take longer to reach its target, projecting a 3.0% target by 2025. Governor Victoria Rodriguez Ceja has left the possibility of rate cuts open, with discussions expected in the first quarter of 2024.

The impending release of the US ISM Manufacturing PMI for November and the scheduled speech by US Federal Reserve (Fed) Chairman Jerome Powell on Friday hold substantial importance for market dynamics. Investors will closely monitor these events, as they have the potential to play a crucial role in determining the path of the USD/MXN pair.