USD/MXN loses its recovery momentum around 17.20 ahead of US PMI data

• USD/MXN hovers around 17.20 amid the USD demand.
• The hawkish remarks from the Federal Reserve (Fed) boost the US Dollar against the Mexican Peso.
• Mexican Retail Sales came at 0.2% MoM in July from 2.3% in the previous reading.
• Traders await the Mexican Economic Activity, US PMI data due on Friday.

The US Dollar (USD) loses its recovery momentum against the Mexican Peso and edges lower to 17.20 during the Asian trading hours on Friday. The hawkish remarks from the Federal Reserve (Fed) lift the Greenback broadly. Investors shift the attention to the release of US S&P Global/CIPS PMI data for September due later in the American session on Friday.

The Fed decided to hold interest rates unchanged at the 5.25-5.50% range on Wednesday’s meeting, as widely anticipated in the market. Additionally, Fed Chairman Jerome Powell reaffirmed the US central bank’s commitment to achieving a 2% inflation target in a press conference while mentioning that the Fed is ready to raise rates if necessary. This, in turn, lifts the Greenback and acts as a tailwind for the USD/MXN pair.

According to the Fed's most recent quarterly predictions, the benchmark overnight interest rate may be hiked one more time this year to a peak range of 5.50% to 5.75%, and rates could be significantly tighter through 2024 than previously anticipated.

On Thursday, the US weekly Initial Jobless Claims dropped to 201,000, the lowest level since January. Meanwhile, the Philly Fed dropped to -13.5 in September from 12.0 in the previous reading, worse than expected at -0.7. Existing Home Sales fell to 4.04M MoM in August from the previous reading of 4.07M.

On the Mexican Peso front, the Instituto Nacional de Estadistica Geografia e Informatica (INEGI) reported on Thursday that Mexican Retail Sales came at 0.2% MoM in July from 2.3% in the previous reading, as market expected. On an annual basis, the figure rose by 5.1% versus 5.9% prior, above the market consensus of 4.9%.

Looking ahead, market players will take cues from the Mexican Economic Activity data for July ahead of the US PMI data. These figures could give a clear direction to the USD/MXN pair.