USD/MXN extends losses to near 17.07 ahead of US CPI data on Tuesday

• USD/MXN faces challenges as the Greenback declines due to downbeat US yields.
• Rabobank forecasted a 25 basis points rate cut by Banxico at the June meeting.
• The US Dollar fails to receive upward support from the hawkish remarks by the Fed officials.

USD/MXN continues to decline for the second consecutive session, trading at around 17.07 during the European session on Monday. The Mexican Peso (MXN) strengthened as headline Mexican inflation picked up pace in January, mainly driven by an increase in non-core components, while core inflation showed a decrease.

Economists at Rabobank analyze the outlook for the USD/MXN pair. Their base case scenario suggests a 25 basis points (bps) cut at the June 27 meeting, following the anticipated first cut by the US Federal Reserve (Fed) on June 12.

On the other side, the US Dollar faces pressure from downbeat US bond yields, with the US Dollar Index (DXY) slipping to around 104.00. Both 2-year and 10-year US yields are hovering at 4.47% and 4.16%, respectively, by the press time.

Dallas Federal Reserve (Fed) Bank President Lorie Logan expressed that there is presently no urgent need to reduce interest rates. Logan underscored the importance of acquiring further evidence to ensure the sustainability of progress in inflation.

This sentiment aligns with US Fed Chair Jerome Powell’s rejection of the notion of a rate cut in March, as conveyed during a press conference following the interest rate decision on January 31.

The hawkish comments from the US Fed officials fail to cheer the Greenback as market participants adopt a cautious stance ahead of the US Consumer Price Index (CPI) data on Tuesday.