Markets today are witnessing a decline in the exchange rate, with the pair trading near 17.1000 during the European session. This movement comes as investors adjust their expectations for the Federal Reserve’s monetary policy, anticipating an end to the tightening cycle and beginning to price in potential interest rate cuts starting from March 2024. Contributing to the bearish sentiment on the US dollar are the downbeat October US CPI figures, which registered at 3.2%.
Adding to the pressure on the US dollar are the lower US Treasury yields, which have dropped to 4.39% for the ten-year note and 4.90% for two-year bonds. Market participants are also keenly awaiting the release of the FOMC minutes, which may provide further insights into the decision-making process of the Federal Reserve.
In Mexico, attention is shifting towards inflation data, with expectations of minor increases in November’s Consumer Price Index (CPI). The core CPI, which excludes volatile food and energy prices, is anticipated to remain unchanged initially before a slight reduction is forecasted. Minutes from Banco de México (Banxico) reveal subtle shifts in language regarding interest rate maintenance. Meanwhile, indications from the swap market suggest that a half-point rate cut by Banxico might be on the horizon by mid-2024.
Investors and analysts will be closely monitoring these developments as they could have significant implications for future monetary policy decisions in both countries.
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