Mexican Peso begins the week on the back foot, driven by Fed Chair Jerome Powell disregarding Mexico’s quiet Constitution Day shifts focus to inflation data and Banxico’s upcoming rate decision.

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• Mexican Peso begins the week on the back foot, driven by Fed Chair Jerome Powell disregarding Mexico’s quiet Constitution Day shifts focus to inflation data and Banxico’s upcoming rate decision.
• US’s strong Services PMI and Nonfarm Payrolls hint at the Fed’s achievable soft-landing.
• Expectations lean towards Banxico holding rates at 11.25%, with eyes on Fed speakers for more insights.

The Mexican Peso loses ground against the US Dollar (USD) courtesy of Federal Reserve Chairman Jerome Powell’s interview during the weekend, sponsoring a jump in US Treasury bond yields. Along with a holiday in Mexico, that boosts the Greenback amid a risk-off impulse. At the time of writing, the USD/MXN exchanges hands at 17.21, up 0.51%.

Mexico´s economic docket is empty due to Mexico’s Constitution Day observance. This week, inflation data will be released on Wednesday, followed by the Bank of Mexico (Banxico) monetary policy decision, on Thursday. Rates are expected to remain unchanged at 11.25%.

In the meantime, the US economy continues to shine as the release of Services PMI by S&P Global and the Institute for Supply Management (ISM) showed that business activity is improving. That, along with last Friday’s US Nonfarm Payrolls data, increases the odds of the Fed achieving a soft landing.

Meanwhile, some Federal Reserve speakers had begun to cross the wires following the Fed’s decision last Wednesday.

The USD/MXN is neutral-biased and jumped off the 50-day Simple Moving Average (SMA) at 17.13, though it has fallen short of reclaiming the 200-day SMA at 17.32. A daily close above the 17.20 strong resistance buyers could challenge the 200-day SMA, followed by the 100-day SMA at 17.40. Further upside lies at the 17.50 figure.

On the other hand, if sellers drag prices below the 50-day SMA at 17.13, look for a challenge of the February 2 daily low at 17.03, before slumping to 17.00.

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