Impact Of US Inflation Data
On the US side, the lower-than-expected inflation figures are a development that could force the Fed into easing monetary policy sooner than previously expected. The Producer Price Index, which feeds into the Core PCE Price Index, is now in focus. This next data point will be closely monitored, as it could reinforce expectations around rate cuts or, conversely, dampen them if inflation at the producer level starts picking up again.
Growth projections for Mexico place the economy at an expected 0.81% expansion. That level of growth has reignited discussions about whether the central bank will start trimming interest rates in the short term. This is particularly relevant given Banxico’s inflation target of 3%—if economic conditions suggest inflation is contained, downward adjustments to rates would make sense. Separately, President Sheinbaum’s comments dismissing the need for IMF assistance signal confidence in financial stability, though this alone is unlikely to move the markets.
February’s US CPI numbers confirmed a disinflationary trend, as both the monthly and yearly increases were lower than market expectations. This further drives the case for lower rates, with futures markets now pricing in 74 basis points of easing from the Fed before the year is over. However, along with potential rate cuts, there is also a growing feeling among economists that recession risks are increasing across North America, which could introduce fresh volatility.
Technical Outlook For USD MXN
From a technical perspective, USD/MXN is trading below 20.20 and is edging closer to the 20.00 level. If prices slip under this threshold, it could spark another leg lower, setting up further hurdles for those holding long Dollar positions. Conversely, a move back above the 100-day Simple Moving Average would shift momentum towards Dollar buyers, suggesting a possible rebound.
Multiple factors continue to shape the Peso’s direction—growth expectations, trade relations, and remittances all feed into its performance. Banxico’s stance on inflation remains a strong guiding force, as policymakers weigh adjustments to interest rates based on shifting economic conditions.
Macroeconomic data releases will remain key for gauging overall stability, as they provide direct input into monetary policy decisions. Given the Peso’s characteristics as an emerging-market currency, its performance often fluctuates based on global appetite for risk-taking. When confidence in economic growth holds steady, MXN tends to perform well, yet during uncertain periods, we have historically seen pressure build on the currency.
In the coming weeks, the focus will remain on the interplay between US rate expectations, Mexican economic momentum, and policy shifts on both sides of the border. Traders should be prepared for potential volatility as new data releases shape the next steps for the Peso and its counterpart.
