USD/MXN trades around 17.4200 post rebounding from a two-month low

• Mexican Peso gains ground as US economic data eased in the previous week.
• Fed is expected to conclude its policy tightening after disappointing US NFP.
• Banxico’s policymakers stated the importance of maintaining rates at higher levels.

USD/MXN trades lower around 17.4200 post-rebounding from a two-month low. The US Dollar (USD) dropped after a jobs report in the United States (US) surprisingly missed estimates, portraying a labor market that is further cooling.

The moderation in labor market data is viewed as a reaction to the US Federal Reserve’s (Fed) strategy to tackle inflationary pressures by implementing higher interest rates. The Greenback encounters challenges, with market participants anticipating that the US Fed might conclude its monetary tightening and foreseeing the possibility of multiple rate cuts in 2024.

US Non-Farm Payrolls (NFP) data exerted downward pressure on the USD/MXN pair, revealing a figure of 150K, marked a significant decline from the 297K recorded in September. The US Unemployment Rate rose to 3.9%, contrary to the market’s expectation of remaining stable at 3.8% in October.

US Dollar Index (DXY) weakened on the lackluster US Treasury yields, a reaction to disappointing US labor data. The yield on a 10-year US Treasury bond stands at 4.58% by the press time.

On the Mexican front, the Fiscal Balance took a dip to -132.56B from the previous reading of -39.15B. This week’s calendar highlights the Headline Inflation data for October and the monetary policy decision from the Bank of Mexico (Banxico).

According to Banxico’s recent minutes, policymakers stressed the importance of maintaining rates at their current levels in the face of elevated inflation. As a result, traders are anticipating that Banxico will keep rates steady at 11.25%.