Title: Volatility in Fitch Issue Impacting Peso, All Eyes on US Inflation Report
The recent Fitch issue has stirred up some volatility, but experts believe that the disinflationary trend, along with upcoming US inflation data, might prompt the Federal Reserve to pause its interest rate hikes. As a result, the Mexican peso might see a potential dip below 17 again, according to James Salazar, Deputy Director of Economic Analysis at CI Bank.
Salazar emphasized that the employment report earlier this week and the forthcoming US inflation report next week will likely further confirm the disinflationary trend. This could lead to the speculation that the Federal Reserve might halt its interest rate hikes, creating a favorable scenario for the peso to strengthen.
While Salazar’s end of year expectations for the peso stand at 17.60, he believes that in the short term, market sentiment will be primarily driven by US monetary policy and inflation data. Should these expectations be met, the peso is expected to continue its favorable trend.
Sharing a similar sentiment, Eduardo Ramos, an analyst at ATFX, acknowledged that this week’s market movement has had a slight impact on investor risk tolerance. However, he stated that current levels are likely to be maintained due to the influence of interest rates and inflation data.
In terms of upcoming data releases, Mexico’s inflation data is set to be published during the early hours of Wednesday, while the US price index report will be released at 6:30 am on Thursday. These figures will undoubtedly serve as critical factors in shaping market sentiment and determining the future direction of various currencies, including the peso.
As uncertainty looms over the Fitch issue and investors closely monitor the US inflation report, the Mexican peso remains at the center of attention.