USD/MXN rebounds from 17.10 follows footprints of USD Index

• USD/MXN has displayed a recovery move from 17.10 following positive cues from the USD Index.
• S&P500 futures have increased losses as investors are hoping that recession fears in the US have not receded.
• The US economy is operating in a better position beyond full-employment levels and will keep households demand at elevated levels.

The USD/MXN pair has shown a recovery move after defending its crucial support of 17.10 in the European session. The asset is following the footprints of the US Dollar Index (DXY) as the latter has also shown a recovery move from 102.00.

S&P500 futures have increased losses in the London session as investors are hoping that recession fears in the United States have not receded despite the Federal Reserve (Fed) has skipped hiking interest rates in June.

The USD Index has rebounded firmly to near 102.23 as two more interest rate hikes have been announced by Fed chair Jerome Powell. Also, Fed Powell confirmed that rate cuts are not appropriate by year-end. The Fed believes that headline inflation has softened due to the gasoline prices impact while the core inflation is still showing persistence.

Apart from that, US labor market conditions are well tight in spite of the Unemployment Rate having increased to 3.8%. The US economy is still operating in a better position beyond full-employment levels and will keep households’ demand at elevated levels.

On Thursday, US Census Bureau reported that monthly Retail Sales (May) surprisingly expanded by 0.3% while the street was anticipating a contraction of 0.1% but the pace of expansion was slow against the prior pace of 0.4%. Scrutiny of the Retail Sales report shows that demand for automobiles was extremely solid though inflationary pressures have squeezed the real income of households.

On the Mexican Peso front, Bank of Mexico (Banxico) Governor Victoria Rodriguez Ceja is expected to hold interest rates at a record-high for at least the next two meetings before considering neutrality.