The Dollar rises to 16.77 against the Mexican Peso awaiting Banxico

• USD/MXN has risen to a daily high of 16.77 after the Wall Street open.
• Banxico will announce its interest rate decision today, Thursday at 19:00 GMT.
• The dollar has recovered much of the ground lost after the Fed's announcement.

The USD/MXN opened the European session hitting one-week lows at 16.66, but has been gaining ground in recent hours with the recovery of the Dollar, recently reaching a daily high at 16.77.

Dollar regains much of lost ground after Fed projections maintain three rate cuts through end-2024

The Fed announced yesterday Wednesday that it was keeping its interest rates at 5.5% for the fifth consecutive meeting. Furthermore, their projections confirmed that three rate cuts of 25 basis points each are still expected through the end of 2024, as had been projected at the December meeting.

Following the announcement, the Dollar Index (DXY) sank to reach 103.17 in the Asian session today, Thursday, its lowest level in a week. Subsequently, the index has been recovering ground, reaching a daily high of 103.96 after the opening of Wall Street.

The US data published today Thursday has improved expectations, helping to boost the Dollar. Existing home sales rose 9.5% in February, their biggest increase in a year. Meanwhile, the Philadelphia Fed manufacturing index stood at 3.2 points in March, below the 5.2 in February, but above the -2.3 expected and the S&P manufacturing has improved to 52.5 in the preliminary reading for March, surpassing the 51.7 expected. Finally, weekly unemployment benefit claims fell to 210,000 the week of March 15, improving on the estimated 215,000. The services PMI

All eyes point to Banxico

At 19:00 GMT this Thursday, Banxico will publish its decision on Mexico's interest rates, expecting a reduction of 25 basis points to 11% from the current 11.25%. If this cut is confirmed, we would be facing the first variation in rates after seven consecutive meetings without variations. Confirmation of the cut or a larger-than-expected reduction could weaken the Mexican peso against the dollar, at least in the short term. On the contrary, if rates do not vary, the MXN would strengthen against the USD, potentially taking the USD/MXN to new lows so far this year.

Prior to the data, Mexico has published retail sales data for January, which showed a drop of 0.8% annually, disappointing the expected 1.2% rise.

USD/MXN Price Levels

With the US Dollar trading at 16.75 Mexican pesos at the time of writing, gaining 0.43% daily, the first resistance in case of new advances awaits at 16.94, the week's ceiling reached on March 19. Above, the main barrier remains in the psychological zone of 17.00.

On the downside, initial support is at 16.64, the 2024 minimum reached on March 14. Below I would expect strong support at 16.62, the July 2023 floor and the lowest level recorded since 2015. A break of this level would take us towards 16.35, the November 2015 floor, before landing in the psychological zone of 16.00.