USD/MXN retraces recent gains on improved risk sentiment, trades near 17.5200

• USD/MXN snaps the recent gains as market risk sentiment is improved.
• The slowdown in the US labor market could influence the Fed to conclude its policy tightening.
• Banxico is expected to remain consistent at 11.25%; the decision is scheduled for release on Thursday.

USD/MXN aims to retrace the recent gains on positive risk sentiment, trading lower around 17.5200 during the European session on Tuesday. United States (US) employment data indicates the slowing down of the labor market as recent data on Non-Farm Payrolls (NFP) came in significantly lower than expected.

As a result, investors are inclined to expect that the US Federal Reserve (Fed) might halt the monetary policy tightening, especially after the dovish decision in November's meeting to keep interest rates between 5.25% and 5.5%. Moreover, the softening labor market in the United States (US) is prompting traders to factor in the possibility of multiple rate cuts by the end of 2024, potentially contributing to the improvement of the risk appetite.

US Dollar Index (DXY) hovers in the positive territory near 105.50, recovering recent losses as US bond yields rebound from the six-week lows, with the 10-year US Treasury yield standing at 4.62% by the press time.

On Monday, Mexico's Consumer Confidence, as reported by the National Statistics Agency (INEGI), declined from 46.8 to 46.0 in October. The Bank of Mexico (Banxico) is set to release the Headline Inflation, with expectations for a decline to 0.39% in October from the previous 0.44%. Additionally, Banxico's Interest rate decision, anticipated to remain consistent at 11.25%, is scheduled for release on Thursday.