USD/MXN widens losses on growing expectations of Fed rate cut in June, trades near 16.80

• USD/MXN extends its losing streak ahead of US CPI data scheduled for Tuesday.
• CME FedWatch Tool suggests a 73.8% probability of a rate cut in June.
• US Dollar suffered losses following the mixed employment data from the United States.

USD/MXN continues its downward trend following mixed employment data from the United States (US). The pair inches lower to around 16.80 during the European session on Monday. Negative sentiment surrounding the US Dollar Index (DXY) weakens the USD/MXN pair amid growing expectations of a Federal Reserve (Fed) rate cut in June.

According to the CME FedWatch Tool, there is a 73.8% probability of a rate cut in June. Furthermore, Federal Reserve (Fed) Chair Jerome Powell hinted at potential cuts in borrowing costs sometime this year, emphasizing that such actions would depend on the inflation trajectory aligning with the Fed's 2% target.

In February, US Nonfarm Payrolls added new jobs by 275K, exceeding January's figure of 229K and market expectations of 200K. However, US Average Hourly Earnings (YoY) increased by 4.3%, slightly below both the estimated and previous reading of 4.4%. Investors will likely observe the Consumer Price Index data from the United States (US) scheduled for Tuesday, along with Retail Sales and Producer Price Index data expected on Thursday.

On the Mexican side, the 12-Month Inflation rate increased by 4.40% in February. This figure represented a decline from a seven-month high of a 4.88% rise in January and was slightly lower than the forecasted increase of 4.42%. Core Inflation increased by 0.49%, higher than the previous 0.40% rise. However, Headline Inflation rose by 0.9%, which was lower than the expected 0.11% and the previous 0.89% increase. Market participants are eagerly awaiting the upcoming policy meeting of the Bank of Mexico (Banxico) on March 21.