USD/MXN grapples to snap its recent losses ahead of US data, holds above 16.90

• USD/MXN experienced losses as the Fed is expected to ease policy tightening in early 2024.
• Improved US yields seem failing to contribute support for the US Dollar.
• Mexico’s Jobless Rate is expected to eased at 2.6% from 2.7% prior.

USD/MXN attempts to snap its recent losses, holding ground near 16.91 during the European session on Thursday. The USD/MXN faces challenges due to the weaker US Dollar (USD), which could be attributed to the potential for rate cuts by the Federal Reserve (Fed) in the first quarter of 2024.

CME Fedwatch tool suggests that markets are pricing in a probability of more than 88% for a rate cut in March, with full pricing in of a rate cut in May. These figures underscore the prevailing expectations among investors for potential monetary policy easing by the Federal Reserve (Fed).

Additionally, the decline in the US Treasury yields contributed to downward pressure to undermining the Greenback. However, the 2-year and 10-year yields on US bond coupons attempt to halt recent losses, standing at 4.26% and 3.81%, respectively.

Last week’s softer US Core PCE – inflation adds to the belief that the Federal Reserve may consider easing its monetary stance to address economic conditions. This economic indicator plays a crucial role in the Fed’s assessment of inflation trends and overall economic health.

Investors are expected to closely monitor Thursday’s releases as these data points provide additional insights into the labor market and the real estate sector. US Initial Jobless Claims for the week ending on December 22 is expected to print a slightly higher number of 210K against the previous 205K. Moreover, Pending Home Sales could rise to 1.0%, swinging from the previous decline of 1.5%.

On Mexico’s side, the Jobless Rate for November will be released by the National Institute of Statistics and Geography of Mexico (INEGI) on Thursday. The market expects that the rate of unemployed workers will be reduced to 2.6% from the previous 2.7%. Moreover, Fiscal Balance for November is due to be released on Saturday.