• The Mexican Peso trades steadily ahead of key inflation data. 
• Banxico will hold its meeting on Thursday; a 25 bps rate cut is expected.  
• USD/MXN claws higher from the base of a rising channel, supported by firm momentum. 

The Mexican Peso (MXN) fluctuates between tepid gains and losses in its major pairs on Tuesday, ahead of key inflation data later in the day, followed by the Bank of Mexico (Banxico) September policy meeting on Thursday – both factors that could influence the Mexican currency.

Mexican Peso to take cue from inflation data, Banxico meeting

The Mexican Peso has seen moderate weakening against both the US Dollar (USD) and the Pound Sterling (GBP) over the last few days, whilst against the Euro (EUR), it has traded mixed due to the single currency weakening on Monday on growth fears in the Eurozone. 

The Instituto Nacional de Estadística Geografía e Informática (INEGI) will release the 1st half-month inflation and core inflation for September on Tuesday at 12:00 GMT. 

The previous month’s data showed a 0.03% decline in headline and a 0.1% rise in core inflation. If the new figures are higher, there is a possibility they could influence the Bank of Mexico decision. Higher inflation might increase the probability Banxico will leave interest rates unchanged, whilst lower inflation, that the central bank will cut interest rates.

Banxico currently holds its official interest rate at 10.75%, but this will probably change after Thursday’s meeting. According to a recent Bloomberg survey, 20 out of the 25 economists and bank analysts believe Banxico will go ahead with a 25 basis points (bps) (0.25%) cut. Four analysts expect a 50 bps (0.50%) cut and only one that the central bank will leave interest rates unchanged. The expectation of lower interest rates is generally negative for a currency since it lessens foreign capital inflows.