Mexican Peso Ends Week and Day Strong Against US Dollar

The Mexican Peso continued its upward trend for the seventh consecutive day against the US Dollar, boosted by a weaker Dollar following a mixed US jobs report. The report heightened speculation that the US Federal Reserve might cut interest rates in June, causing the Greenback to hit seven-week lows. This benefited the Mexican Peso, which is set to finish the week with gains of over 0.20%. The USD/MXN pair traded at 16.81, marking a 0.31% decline and closing the week with losses exceeding 1.21%.

While Mexico’s economic calendar remained quiet on Friday, earlier data released during the week could influence the upcoming rate decision by the Bank of Mexico (Banxico) on March 21. Notably, inflation figures fell below expectations, with the Consumer Price Index (CPI) showing monthly and annual lower-than-anticipated readings.

Across the border, the US Bureau of Labor Statistics (BLS) published a mixed report on US Nonfarm Payrolls (NFP). While job growth exceeded expectations, January’s figures were revised downward, and the Unemployment Rate rose to 4%.

The Mexican Peso’s recent performance aligns with expectations from analysts, who foresee a depreciation of the Peso against the Dollar in the coming months. Additionally, there are indications that Banxico could cut rates as early as the March 21 meeting, based on predictions from a Reuters poll.

Banxico’s policymakers recently cautioned about premature rate cuts, emphasizing the need for gradual adjustments. Despite this, there are expectations for a rate cut in March, driven by concerns over economic growth and inflation.

On the political front, the race in the United States appears to be taking shape, with former President Donald Trump leading the Republicans and President Joe Biden leading the Democrats.

Overall, market sentiment suggests an increased likelihood of a rate cut by the Federal Reserve in June, as indicated by the CME FedWatch Tool. Meanwhile, technical analysis suggests a solid rally for the Mexican Peso against the US Dollar, with potential support levels and resistance thresholds outlined for the USD/MXN pair.

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