• Positive sentiment supports the Mexican Peso (MXN), but Fed tightening concerns arise due to last week’s US unemployment data.
• Expectations for a post-July Fed rate hike rise to 28%, a significant leap from last month’s 15.9% odds, as the CME FedWatch Tool reported.
• USD/MXN traders eye next week’s Mexican inflation data, with both readings expected to decelerate.

USD/MXN holds to its earlier gains after reaching the 17.00 figure on Friday but trimmed some as the USD/MXN pair edged towards the 20-day Exponential Moving Average (EMA) at 16.9666. At the time of writing, the USD/MXN is trading at 16.9494, climbing 0.47%, ahead of the weekend.

USD/MXN sees slight trim after peaking at 17.00, buoyed by solid US jobs data and mounting anticipation of Federal Reserve tightening

Sentiment remains upbeat, which usually favors the Mexican Peso (MXN). Nevertheless, last week’s US unemployment claims for the week ending July 15 spurred woes the Federal Reserve (Fed) would continue to tighten monetary conditions past the July meeting. Other data revealed during the day was mixed, with US retail sales missing estimates, but continued to show consumers resilience, while housing market data witnessed a dip after registering positive figures in May.

Meanwhile, expectations the Fed would raise rates past the July meeting surged to 28%, from last month’s 15.9% odds, as revealed by the CME FedWatch Tool.

Consequently, the greenback rose, registering more than 1% weekly gains. As of writing, the US Dollar Index (DXY), a measure that tracks the performance of the US Dollar against six peers, sits at 101.052, which advances 0.23%, on Friday.

That helped to offset some of the USD/MXN 4.27% losses during the last couple of weeks, with the pair briefly testing the 17.00 psychological barrier.

Retail sales disappointed USD/MXN traders on the Mexican front, which punished the peso as the pair climbed 1% on Thursday. On its latest two meetings, the Bank of Mexico (Banxico) kept rates unchanged at 11.25% and is expected to cut rates towards Q4 2023.

The following week’s highlight on the Mexican docket would be the inflation data report, with most traders expecting the Consumer Price Index (CP) at 4.77% in the first 15 days of the month, according to a Reuters poll. Core CPI is expected to slide to 6.73%. Although both figures remain above Banxico’s 3% plus or minus one percentage point target, the disinflationary process continues in the Mexican economy