- Mexican Peso gains as February's lower-than-expected inflation fuels speculation of an upcoming Banxico rate cut.
- Mixed signals from Mexico's CPI data leave markets anticipating key Banxico decision on March 21.
- Cooling US job market and widening trade deficit add complexity to Fed's policy outlook as Powell reiterates cautious stance.
The Mexican Peso posted minuscule gains against the US Dollar after Mexico’s National Statistics Agency (INEGI) revealed that inflation cooled in February. Therefore, speculation for the Bank of Mexico's (Banxico) first rate cut looms large. This should weigh on the emerging market currency and underpin the USD/MXN pair. Hence, the exotic pair exchanges hands at 16.88, down 0.13%.
Mexico’s Consumer Price Index (CPI) for February was lower than expected on monthly and annual figures. Nevertheless, underlying CPI came as expected in MoM data, a tick higher compared to January’s reading, but inflation dipped in the annual readings. It remains to be seen whether the conditions are met for Banxico’s first rate cut at the March 21 meeting, and there’s a tranche of data to be released ahead of that date.
In the United States, the job market is cooling. Americans filing for unemployment claims rose above estimates, aligned with the previous week’s data, suggesting the labor market is getting more balanced. At the same time, the US trade deficit widened in January as imports grew more than in December.
At the time of this writing, US Fed Chair Jerome Powell is testifying before the US Senate Banking Committee on Capitol Hill. He is echoing some of Wednesday’s comments, saying that if the economy evolves as expected, the Fed will carefully remove its restrictive policy stance.
- As Fed Chair Jerome Powell testifies, the CME FedWatch Tool shows traders increased their bets for a 25-basis-point rate cut in June from 52.7% a week ago to 71.9%.
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