USD/MXN attempts to retrace recent losses amid weaker US Dollar, trades near 17.25

• USD/MXN halts its losing streak amid subdued Greenback.
• Banxico is expected to hold the interest rate at the current level of 11.25%.
• US Dollar weakens on the Fed's accommodative monetary policy stance in 2024.

USD/MXN rebounds after two days of losses ahead of Mexico's (Banxico) Interest Rate decision on Thursday. The USD/MXN trades higher around 17.25 during the European session on Thursday. The Banxico's is expected to keep cash rates unchanged at the current level of 11.25%.

The Mexican economy continues to display resilience, as indicated by the latest economic indicators. Inflation remains above the Bank of Mexico's (Banxico) target, underscoring the ongoing economic strength. The recent Industrial Output data for October further highlights a robust performance in factories and manufacturing.

US Dollar Index (DXY) is on a downward trend, influenced by the subdued US bond yields following the dovish outlook from the Federal Reserve (Fed) regarding the Interest Rate trajectory in 2024. The DXY remains lower around 102.60 by the press time, reflecting the market's response to the Fed's decision to keep interest rates unchanged.

The Fed's "dot-plot" further underscores a potentially more accommodative monetary policy stance in the coming year, with projections indicating a 50 basis points decline from 5.1% to 4.6%.

The challenges for the Greenback persist as discouraging Producer Price Index (PPI) data for November is released, putting additional pressure on the US Dollar. According to the US Bureau of Labor Statistics, the year-on-year growth in PPI slowed to 0.9%, falling short of the expected figures of 1.0%. Similarly, the Core PPI recorded 2.0%, below the anticipated 2.2%.

Market participants will eagerly observe the release of US Retail Sales data later in the North American session, as it is likely to provide further insights into the health of the US economy.