• Mexican Peso capitalized on weaker-than-expected US economic output, uptick in risk appetite.
• Upcoming mid-month inflation data in Mexico could impact Banxico's rate decisions, with expectations leaning toward easing policy.
• The Citibanamex poll shows analysts expect Banxico to hold rates unchanged in May but could resume its easing cycle in June.

The Mexican Peso stages a comeback and rallies against the US Dollar in early trading during Tuesday’s North American session. Weaker-than-expected economic data from the United States (US) and an improvement in risk appetite kept the Greenback pressured as geopolitical woes temper. The USD/MXN trades at 16.99, clocks losses of 0.81%.

Mexico’s economic docket revealed on Monday that economic activity in February 2024 improved, though it failed to boost the Peso. Traders are expecting the release of mid-month inflation figures for April, with core inflation expected to dip further, while the headline Consumer Price Index (CPI) is foreseen remaining unchanged. If the disinflation process shows signs of evolving, that could influence the Bank of Mexico (Banxico) to continue to cut rates, which remain elevated at 11.00%.

The Citibanamex Poll released on Monday suggests that most analysts expect Banxico to keep rates unchanged at the May monetary policy meeting. The consensus expects a rate cut for the June meeting, while the median estimate calls for the main reference rate to end at 10.00%, up from 9.63% previously.

Across the border, S&P Global revealed that business activity in the US edged lower, an indication that the economy is slowing down amid higher interest rates set by the Federal Reserve.