Mexican Peso strengthens amid comments from Banxico’s Rodriguez Ceja

• Mexican Peso extends gains for a third session, buoyed by central banker’s remarks.
• Banxico Governor's comments on inflation and easing hint at policy shifts as MXN gathers traction.
• NY Fed's Consumer Inflation Expectations for one year in January remained steady.

The Mexican Peso moderately gains ground against the US Dollar for the third straight trading session on Monday as Bank of Mexico (Banxico) Governor Victoria Rodriguez Ceja crossed the wires. Although Federal Reserve (Fed) officials laid the ground to ease policy in 2024, they pushed back against rate cuts as early as March. The USD/MXN trades at 17.05, down 0.20%, with sellers eyeing the 17.00 figure.

Mexico’s economic docket featured a speech by Banxico’s Governor Rodriguez, who spoke about inflation and the likelihood of easing monetary policy. Across the border, the calendar featured the New York Federal Reserve’s one-year Consumer Inflation Expectations registering at 3%, unchanged compared with December.

Daily digest market movers: Mexican Peso is firm ahead of US inflation report

• In an interview with El Financiero, Banxico’s Governor, Victoria Rodriguez Ceja, said that inflation is expected to return to its downward trajectory and continue the disinflationary process. She added that despite increasing in the last three months, the Mexican central bank sticks to its vision that inflation will hit its 3% goal in 2025.
• Rodriguez Ceja added that despite lowering interest rates during the year, the bank remains focused on inflation. She added, “The inflationary episode has been evolving, and the situation we find ourselves in now is very different from the one we experience in 2022, even in the first months of 2023.”
• Rodriguez Ceja said the bank would make its decision based on various factors and data, including Fed’s decisions.
• Mexico’s central bank revised their inflation expectations to the upside for Q1 to Q3 of 2024, and they expected to converge toward 3.5% in Q4, based on the latest monetary policy statement.
• Last Thursday, INEGI revealed that in January, Mexico´s Consumer Price Index (CPI) rose by 4.88% YoY, while underlying inflation moderated to 4.76%.
• Atlanta Fed President Raphael Bostic said the Fed must be resolute and added that he’s “laser-focused” on inflation. At the same time, Dallas Fed President Lorie Logan noted that there’s no urgency on cutting rates.
• The US Bureau of Labor Statistics (BLS) will release inflation data on February 13. The Consumer Price Index (CPI) for January is foreseen dipping from 3.4% to 2.9% YoY. The Core CPI is expected to dip from 3.9% to 3.7% on an annual basis.

Technical analysis: Mexican Peso stays firm as USD/MXN remains below 17.10

The USD/MXN is neutral to downwardly tilted with sellers eyeing a break below 17.00. Relative Strength Index (RSI) studies suggest that bears are in charge, but the slope is turning somewhat flat. If sellers push prices below 17.05, that could open the door to test the psychological 17.00 figure. A breach of the latter could pave the way to challenge 2023 low of 16.62.

On the other hand, if buyers reclaim the 50-day SMA at 17.11, that can pave the way to test the 200-day SMA at 17.29. Upside risks emerge once that barrier is cleared with the following supply zone coming at 17.40, the 100-day SMA.

USD/MXN Price Action – Daily Chart