- USD/MXN is trying to end a losing streak on an improved dollar.
- The US dollar could face pressure as the Fed is expected to cut key interest rates more than other major central banks in 2024.
- Negative retail sales data in Mexico may have put downward pressure on the MXN.
USD/MXN snaps three-day losing streak on improvement American dollar (AMERICAN DOLLAR). The USD/MXN pair is trading higher near 17.10 during early European hours on Monday. The US dollar index (DXY) rose to near 103.20 with improved 2-year and 10-year US Treasury coupon yields at 4.41% and 4.12% at the time of writing.
However, the US dollar encountered downward pressure due to prevailing market expectations leaning towards a tapering policy by the US Central Bank (Fed). rates more than other major central banks in 2024. However, the dollar may find support, benefiting from its safe-haven status, especially amid concerns over maritime trade in the Red Sea. As a result, this adds to the upside support to support the USD/MXN pair.
The increased geopolitical threat, as the United States (US) and United Kingdom (UK) look to escalate their campaign without provoking a wider conflict with Iran, has led to more ships being diverted from the Suez Canal and the Red Sea. This diversion is prompting shipping vessels to carefully assess the risks associated with sailing in the Red Sea, with rising insurance costs becoming a significant factor.
On the other hand, retail sales released on Friday by INEGI showed a drop in retail sales in Mexico in November. Year-on-year growth slowed to 2.7% from a previous increase of 3.4%, missing expectations of 3.2%. Meanwhile, monthly sales came in at 0.1% versus expectations of 0.5%. The previous figure was 0.8%.
The Bank of Mexico (Banxico) will publish first-half inflation data for January on Wednesday. The market expects a reduction to 0.38% from the previous 0.58%. While core inflation may have come in at 0.28% against the previous reading of 0.46%.
