• Mexican Peso strengthens after US Consumer Confidence deteriorated.
• Mexico’s inflation fell below estimates in September, with core inflation easing under 5%, boosting expectations for a 25 bps rate cut by Banxico on Thursday.
• Analysts expect Banxico to lower rates from 10.75% to 10.50%, citing falling inflation, weaker economic activity and Fed easing.

The Mexican Peso advanced against the US Dollar during the North American session after the Conference Board (CB) revealed that Consumer Confidence in the United States (US) deteriorated. Meanwhile, Mexican inflation dipped below estimates ahead of Thursday's Bank of Mexico (Banxico) monetary policy meeting. At the time of writing, the USD/MXN trades at 19.36, dropping over 0.28%.

Mexico’s inflation in the first half of September dipped in MoM and YoY figures, according to the Instituto Nacional de Estadistica Geografia e Informatica (INEGI). Core numbers edged lower after being above the 5% threshold and improved compared to the previous reading.

According to Reuters, Banxico is expected to lower interest rates by 25 basis points (bps) on September 26 from 10.75% to 10.50%.

Analysts at Capital Economics quoted by Reuters noted “The fall in inflation, combined with the weakness of economic activity and the fact that the US Fed is now easing monetary policy too, means that Banxico is all but certain to deliver another 25-basis-point cut.”.

Across the border, Consumer Confidence deteriorated in September, hitting its lowest level since August 2021 due to worries about the labor market and the broad economic outlook.

Meanwhile, Fed Governor Michelle Bowman said that risks to inflation are still prominent, adding that she favors “a measured pace of cuts” to avoid reigniting inflation.