• Mexican Peso on the defensive as September inflation aims toward Banxico’s 3% goal.
• Banxico is expected to lower rates further after cutting to 10.50% in September, with additional easing projected by the end of 2024.
• Traders await the release of the Fed’s September meeting minutes and Thursday’s US CPI report as US Treasury yields and the Dollar rise.

The Mexican peso depreciated against the US Dollar on Wednesday following an inflation report that opened the door for further easing by the Bank of Mexico (Banxico). Traders are also eyeing the release of the Federal Reserve’s (Fed) September Meeting Minutes, awaiting clues about the monetary policy path. The USD/MXN trades at 19.40, up over 0.40%.

Mexico’s inflation edged lower in September, according to the Instituto Nacional de Estadistica Geografia e Informatica (INEGI). Headline and Core Consumer Price Index (CPI) readings came below estimates and trended toward hitting Banxico's 3% plus or minus 1% goal.

The USD/MXN aimed higher as the data hints that Banxico could be more aggressive on its easing cycle. On Monday, Banxico Governor Victoria Rodriguez said the governing board may consider larger cuts to its benchmark rate as she spoke to Reuters.

Banxico lowered rates to 10.50% in September and is expected to ease at least an additional 50 basis points (bps) toward the end of 2024. The following meetings will be on November 14 and December 19.

The Fed’s September 17-18 Meeting Minutes are awaited in the US and will appear in the afternoon session. Fed Governor Michele Bowman was the lonely dissenter in voting for a 25 bps rate cut. According to Brown Brothers Harriman analysts, “The minutes may reveal that other Fed officials were resistant to a 50 bp before being convinced to vote with the majority.”