USD/MXN extends its upside above 17.40, eyes on US data ahead of Banxico rate decision

• USD/MXN attracts some buyers on Tuesday amid the USD demand.
• Mexico’s headline inflation came in at 4.64% for for the first half of September from 4.64% at the end of August.
• Minneapolis Federal Reserve Bank President said he sees one more rate hike this year.
• Market players will closely monitor Banxico interest rate decision, US Core Personal Consumption Expenditure (PCE) Price Index this week.

The Mexican Peso (MXN) gains traction for the second consecutuve day against the US Dollar (USD) during the early Asian trading hours on Tuesday. A stonger US Dollar (USD) and higher US Treasury bond yields is supported the pair. USD/MXN currently trades around 17.47, up 0.46% on the day.

Data from statistics agency INEGI showed that Mexico’s headline inflation came in at 4.64% for for the first half of September from 4.64% at the end of August. Mexico President Andres Manuel Lopez Obrador stated last week that Banxico was doing well as inflation slows but the central bank should concentrate more on fostering economic development. However, if the rate of inflation ease, Banxico may adjust its monetary policy and could weigh on the Mexican Peso.

On the USD’s front, the higher for longer rate narrative in the US boosts the Greenback broadly. Early Tuesday, Minneapolis Federal Reserve Bank President, Neel Kashkari stated that he is one of the fed policymakers who sees one more rate hike this year. He added that US rates probably have to go a little bit higher, be held there for longer, to cool things off. This, in turn, lift the USD against the Mexican Peso and acts as a tailwind for the USD/MXN pair.

Later this week, the US CB Consumer Confidence for September and New Home Sales will be due later on Tuesday. The closely watched event will be the US Core Personal Consumption Expenditure (PCE) Price Index on Friday. On the Mexican docket, Trade Balance for August will be released on Wednesday and Banxico Interest Rate Decision will be scheduled on Thursday.