USD/MXN drops toward 17.1000 after US CPI data, focus shifts to Core PPI

Americas FX news wrap 25 Aug: Powell/Fed prepared to raise rates but carefully
  • 14/09/2023 03:15:47 GMT 
  • USD/MXN trades lower after the release of US CPI data on Wednesday.
  • US Dollar (USD) experienced downward pressure following the market sentiment of no interest rate hike by the Fed in September.
  • Core PPI and Retail Sales will be eyed, seeking further cues on economic activities in the US.

USD/MXN is extending its recent decline, which commenced on Friday, as it trades at approximately 17.1300 during the Asian trading session on Thursday. This depreciation is driven by downward momentum triggered by the release of the Consumer Price Index (CPI) data from the United States (US).

The data indicates that while overall inflation may be showing signs of moderation, the core inflation rate, which excludes volatile components, remains relatively steady. The annual core inflation rate has met expectations by recording a reading of 4.3%, consistent with the previous figure of 4.7%.

Nonetheless, the year-over-year US CPI has surged to 3.7%, surpassing the previous rate of 3.2%, and has exceeded market expectations for August, which were at 3.6%. Furthermore, the monthly core CPI has shown improvement, rising to 0.3% from the previous month’s 0.2%, contrary to expectations of it remaining unchanged.

As a result, investor sentiment has shifted towards the likelihood of the US Federal Reserve (Fed) refraining from raising interest rates in the upcoming September policy meeting. According to the CME FedWatch Tool, the Fed is expected to maintain interest rates within the range of 5.25% to 5.50% for the September meeting.

However, the probability of a 25 basis points (bps) rate hike in November stands at 40%, indicating a growing anticipation of the Fed implementing tighter monetary policies later in the year. This suggests that while an immediate rate hike in September seems unlikely, investors are considering the possibility of such a move in the near term.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against a basket of six other major currencies, is attempting to recover from the gains it made on the previous day. At the time of writing, the spot price is trading lower, around 104.70.

DXY initially received support on Wednesday, primarily driven by an initial surge in US Treasury yields. However, it subsequently retraced, with 10-year US bond yields standing at 4.23% at the time of this report.

Market participants are currently closely monitoring forthcoming data releases from the US, including the Core Producer Price Index (PPI) and Retail Sales figures for August. These datasets hold significance as they serve as key indicators of economic activity in the United States.

The data releases have the potential to offer valuable insights into the state of the US economy and could influence sentiment in the currency markets, aiding traders in shaping their strategies when dealing with the USD/MXN pair.

USD/MXN: ADDITIONAL IMPORTANT LEVELS

OVERVIEW
Today last price17.137
Today Daily Change-0.0158
Today Daily Change %-0.09
Today daily open17.1528
TRENDS
Daily SMA2017.0973
Daily SMA5017.0189
Daily SMA10017.2518
Daily SMA20017.9822
LEVELS
Previous Daily High17.2934
Previous Daily Low17.088
Previous Weekly High17.7094
Previous Weekly Low17.0447
Previous Monthly High17.4274
Previous Monthly Low16.6945
Daily Fibonacci 38.2%17.1664
Daily Fibonacci 61.8%17.2149
Daily Pivot Point S117.0627
Daily Pivot Point S216.9726
Daily Pivot Point S316.8573
Daily Pivot Point R117.2681
Daily Pivot Point R217.3834
Daily Pivot Point R317.4735

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