USD/MXN advances to near 17.03 on risk-off sentiment, focus on US data

• USD/CHF retraces recent gains as the US Dollar halts its winning streak.
• The recent Mexico data reduce Banxico’s immediate pressure for policy-tightening decisions.
• The Greenback gains ground on improved US Treasury yields.

USD/MXN continues the winning streak that began on Thursday, trading higher near 17.03 during the European session on Wednesday. The Mexican Peso (MXN) loses ground as the US Dollar (USD) improves on risk-off sentiment. Market participants reconsider the possibility of interest rate cuts by the Federal Reserve in the first quarter of 2024, which pushes the investors to return towards the Greenback.

The recent data from Mexico indicates an increase in the Fiscal Deficit to 87.78 billion in November, a significant rise from the 29.58 billion recorded in October. Despite this, the Jobless Rate remained stable at 2.7%, slightly below market expectations of 2.6%. However, the seasonally adjusted Jobless Rate saw a minor uptick to 2.8% from the previous 2.6%. This shift is attributed to the impact of the higher policy rates maintained by the Bank of Mexico (Banxico). The moderate data may offer some relief to Banxico, potentially reducing the immediate pressure for further tightening of monetary policy.

The US Dollar Index (DXY) could maintain its winning streak for the fourth consecutive session on enhanced US Treasury yields, trading higher around 102.10, with the 2-year and 10-year yields on US Treasury bonds standing higher at 4.34% and 3.96%, respectively, by the press time. The US S&P Global Manufacturing PMI posted a lower-than-expected figure than anticipated. Looking ahead, investors are likely to pay close attention to US data on Wednesday, which includes the December ISM Manufacturing PMI, November JOLTS Job Openings, and the Federal Open Market Committee (FOMC) Minutes.