Mexican Peso tumbles as US CPI data exceeds forecasts, boosting the US Dollar.

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• Mexican Peso tumbles as US CPI data exceeds forecasts, boosting the US Dollar.
• Unexpectedly high US inflation in January shifts market outlook, questioning the Fed’s upcoming interest rate decisions.
• Mexico’s economic calendar is light on Tuesday with attention turning to next week’s Retail Sales, GDP and inflation reports.
• Banxico’s Rodriguez Ceja emphasizes ongoing disinflationary measures in Mexico, aiming to manage inflation effectively.

The Mexican Peso plunged against the US Dollar during Tuesday’s North American session following a red-hot inflation report from the United States. The data caught traders off guard as they were eyeing an acceleration of the disinflation process. They had predicted that the Federal Reserve (Fed) wouldn’t need to keep rates “higher for longer,” but that narrative has returned to the limelight. At the time of writing, the USD/MXN exchanges hands at 17.20, up 0.80%.

The US Bureau of Labor Statistics revealed that January’s headline inflation was higher than expected but below December’s data. That sponsored a leg up in the USD/MXN pair, which could open the door for further upside. Across the border, releases on the Mexican economic calendar remain absent with the next tranche of data on schedule for next week. That series will be led by Retail Sales, Gross Domestic Product (GDP) and mid-month inflation data.

In the meantime, Bank of Mexico (Banxico) Governor Victoria Rodriguez Ceja commented in an interview with El Financiero that the disinflationary process will continue despite the recent uptick while adding that the Mexican central bank remains committed to tackling inflation.

The USD/MXN shifted toward a neutral bias as buyers reclaimed the 50-day Simple Moving Average (SMA) at 17.11. A daily close above that level could open the way to challenge the 17.20 area, followed by the 200-day SMA at 17.29. Further upside is seen at the 100-day SMA at 17.40. The Relative Strength Index (RSI) trends steadily above 50 as the pair has seen a jump in momentum favoring buyers.

Conversely, if sellers drag the exchange rate below the 50-day SMA, the exotic pair could extend its losses toward the 17.00 figure. A breach of the latter will expose last year’s low of 16.62.

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