Dollar rises to two-day highs against Mexican peso after higher-than-expected US CPI

• USD/MXN has risen to two-day highs at 16.47.
• The price of the Dollar has skyrocketed due to the reduced chances of the Fed cutting rates in June.
• US annual inflation grows 3.5% in March, above the expected 3.4%; The core CPI remains at 3.8%, worse than the 3.7% forecast.

The USD/MXN gave ground during the first part of Wednesday, falling shortly before the US inflation data to 16.30, the daily low. Following the release, which showed a higher-than-expected CPI in March, the pair shot up to 16.47, a new two-day high.

The price of the dollar soars due to the persistence of US inflation

He United States Consumer Price Index (CPI) increased three tenths in the annual reading for March, rising to 3.5% compared to 3.2% in February, as published by the Bureau of Labor Statistics. This is the highest figure seen by the indicator in six months. The figure worsens market expectations, which forecast a growth of 3.4%. The annual core CPI has remained persistent at 3.8%, one tenth above the 3.7% forecast. The monthly indicator has grown by 0.4% in both readings, exceeding the estimated 0.3%.

The Dollar Index (DXY) has surged higher following the data, rising from the 104.10 zone to 104.94, its highest level in eight days. The market interprets that the persistence of inflation will delay the Fed's decision to begin lowering interest rates in June, with the first cut being possible in July. The CME Group's FedWatch tool now places the options for a first cut in June at just 20.5%. For the July meeting, the chances rise to 39.8%,

After digesting the inflation data, investors will focus their attention on the FOMC minutes which will be published today at 18:00 GMT, as they could offer new clues about the start or delay of the Federal Reserve's monetary policy easing.

Tomorrow, Thursday, the focus will be on Mexico's industrial production data, which is expected to grow 3.5% annually in February, above the 2.9% in January. The United States, for its part, will publish the Production Price Index for March, expecting an increase in both the general and underlying indicators.

USD/MXN Price Levels

With the Dollar trading above 16.46 against the Mexican Peso, gaining 0.45% daily, the next upward target appears at 16.49/50, the weekly ceiling of April 8 and psychological level. A breach of this zone could take us towards 16.67, the April maximum reached last week. Higher up, the region awaits 16.77, the maximum of the last week of March.

To the downside, a break of the near nine-year low at 16.26 would target 16.10/15, where the August 2015 lows are. Below that awaits the strong psychological region of 16.00 before falling to 15.63, July 2015 bottom.