USD/MXN aims to retrace recent losses, trades higher near 17.6600

• USD/MXN gains ground on weaker Greenback despite improved US bond yields.
• Banxico is expected to maintain interest rates at the current level for some time to achieve the 3.0% inflation target.
• US Dollar faces challenges as investors adopt cautious stance on Fed’s interest rates trajectory.

USD/MXN moves upward, attempting to recover the recent losses near 17.6600 during the early European session on Monday. However, the Mexican Peso (MXN) got a boost after the Bank of Mexico’s (Banxico) decision to keep interest rates steady at 11.25% last Thursday. Not only that, but the central bank has also committed to working towards achieving its 3.0% inflation target by the year 2025 by maintaining policy rates at its current level for some time.

Mexico's inflation took a nuanced turn in October, expanding by 4.26% year on year, a bit below the forecasted 4.28%, and notably lower than the previous reading of 4.45%. Monthly inflation for October edged up by 0.38%, slightly below the consensus of 0.39%.

The US Dollar (USD) experiences challenges, hovering around 105.80 at the time of writing. The buck appears unfazed by the hawkish remarks from Federal Reserve (Fed) Chair Jerome Powell at the International Monetary Fund (IMF) event on Thursday. Powell's acknowledgment that current interest rates may not be doing enough to rein in inflation. This has made the investors adopt a cautious stance before making aggressive bets on USD.

The stable US Treasury yields, standing at 4.65% for the 10-year US bond coupon by press time, could add to the support for the USD. Moreover, the downbeat preliminary US Michigan Consumer Sentiment data on Friday indicated a decline to 60.4 in November from the previous readings of 63.8. This might have contributed to the pressure on the Greenback.

Market participants await Tuesday's release of US inflation data for October, as traders seek fresh cues on the inflationary scenario in the United States.