Mexican Peso remains weak as traders await a crucial US inflation report.

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• Mexican Peso remains weak as traders await a crucial US inflation report.
• Mexico’s trade balance, unemployment and manufacturing PMI to spotlight economic trends amid high Banxico rates.
• Banxico meeting minutes fuel speculation of a March rate cut, influencing the Peso’s trajectory.

The Mexican Peso (MXN) extended its losses against the US Dollar on Monday but stayed near familiar levels, with market participants awaiting a busy weekly economic schedule in the United States. Traders are eyeing the release of the Personal Consumption Expenditures (PCE) report, the Federal Reserve’s (Fed) preferred inflation gauge, along with Q4 2023 Gross Domestic Product (GDP) figures on its second estimate. The USD/MXN trades at 17.12, up 0.14%.

Mexico’s economic docket on Monday is absent, though it gathers pace on Tuesday with the release of the Balance of Trade expected to print a deficit in January. On Thursday, the National Statistics Agency (INEGI) will reveal the Unemployment Rate for January, estimated to increase compared to December’s data, followed by Friday’s Business Confidence and S&P Global Manufacturing PMI.

The economic data in Mexico is expected to show an economic slowdown due to higher interest rates set by the Bank of Mexico (Banxico) at 11.25%. That, along with the latest report of the Consumer Price Index (CPI) dipping sharply for the first half of February, justifies the posture of three members of Banxico. The latest meeting minutes suggested that three policymakers are eyeing the first rate cut at the March meeting, which could put pressure on the Mexican Peso, opening the door for further upside on the USD/MXN exchange rate.

Across the border, housing data was positive, while the Dallas Fed Manufacturing Index in February improved slightly compared to January’s figures.

The USD/MXN continues to consolidate for the third straight day above the 50-day Simple Moving Average (SMA) at 17.07, which could open the door for further gains. If buyers reclaim the psychological 17.20 figure, that could open the door to threaten the 200-day SMA at 17.27. If they cleared those two levels, up next would be the 100-day SMA at 17.38, ahead of the 17.50 figure.

On the other hand, if sellers step in and cap USD/MXN’s upside, they need to push prices below the 50-day SMA, before challenging the 17.00 figure. Once cleared, the next support would be the current year-to-date (YTD) low of 16.78, followed by the 2023 low of 16.62.

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