USD/MXN remains around 17.2300 with negative bias, focus on US housing data.

• USD/MXN is pressured lower by weaker US economic data.
• Initial claims for unemployment benefits in the US reached the highest level in almost three months.
• Banxico could keep monetary policy rates at 11.25% for an extended period to achieve the inflation target of 3.0%.

The USD/MXN moves sideways with a tendency to continue the losing streak that began on November 10. This direction is influenced by additional economic data from the United States (US), which has further cemented market sentiment that the Federal Reserve will not raise interest rates. The pair was hovering around the 17.2300 region during the early hours of the European session on Friday.

Initial U.S. jobless claims for the week ending Nov. 10 totaled 231,000, exceeding the expected 220,000 and marking the highest level in nearly three months. Additionally, claims for continued unemployment benefits for the week ending November 3 rose to the highest level since 2022, reaching 1,865,000, up from the previous reading of 1,833,000. These labor market indicators highlight current challenges in the US labor market, which may contribute to broader market sentiment and potentially influence the US Dollar (USD).

The US Dollar Index DXY is hovering around 104.30 points, experiencing downward pressure mainly attributed to the decline in US Treasury yields. According to the latest data, the yield on the 10-year Treasury note stands at 4.46%, while the yield on the 2-year Treasury note stands at 4.85%. The movement of Treasury yields is a key factor influencing the weakness of the US Dollar (USD), as it reflects market expectations regarding no interest rate hike.

The Bank of Mexico (Banxico) is expected to maintain its interest rates at 11.25% as it works to achieve its inflation target of 3.0% by 2025. The decision will depend on the context of Mexican inflation, which fell to 4.26 % year-on-year in October.

Banxico Governor Victoria Rodríguez Ceja suggested on Monday that a rate cut could be a possibility next year. Additionally, Deputy Governor Jonathan Heath stressed Tuesday that monetary policy will remain restrictive.

With Mexico’s economic agenda remaining thin, traders are likely to focus on U.S. building permits and housing starts, which are scheduled for release on Friday. Expectations of a decline in these housing indicators in October may play a role in supporting the belief that the Fed is unlikely to raise interest rates at upcoming meetings.