- USD/MXN faces downward pressure weaker US economic data.
- US Initial Jobless Claims marked the highest level in nearly three months.
- Banxico could maintain policy rates at 11.25% for a prolonged period to achieve a 3.0% inflation target.
USD/MXN moves sideways with a bias to continue the losing streak that began on November 10. This direction is influenced by additional economic data from the United States (US), which has further cemented the market sentiment of no interest rate hikes by the Federal Reserve. The spot price hovers around 17.2300 during the early European session on Friday.
US Initial Jobless Claims for the week ending on November 10 rose to 231,000, exceeding the expected 220,000 and marking the highest level in nearly three months. Additionally, Continuing Jobless Claims for the week ending on November 3 increased to the highest level since 2022, reaching 1.865 million compared to the previous reading of 1.833 million. These labor market indicators highlight ongoing challenges in the US job market, which may contribute to broader market sentiment and potentially influence the US Dollar (USD).
US Dollar Index (DXY) hovers around 104.30, experiencing downward pressure primarily attributed to the decline in US Treasury yields. As of the latest data, the yield on the 10-year Treasury note stands at 4.46%, while the 2-year Treasury note yield is at 4.85%. The movement in Treasury yields is a key factor influencing the weakness of the US Dollar (USD), as it reflects market expectations regarding no interest rate hike.
The Bank of Mexico (Banxico) is expected to maintain its interest rates at 11.25% as it works towards achieving its 3.0% inflation target by the year 2025. The decision is contingent on the context of Mexico's inflation, which eased to 4.26% year on year in October.
Banxico's Governor Victoria Rodriguez Ceja suggested on Monday that rate cuts could be a possibility next year. Additionally, Deputy Governor Jonathan Heath emphasized on Tuesday that monetary policy will continue to remain restrictive.
With Mexico's economic docket remaining scarce, traders are likely to focus on the US Building Permits (MoM) and Housing Starts (MoM) scheduled for release on Friday. The expectations for a decrease in October in these housing indicators may play a role in supporting the belief that the Fed is unlikely to implement an interest rate hike in the upcoming meetings.
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