USD/MXN advances ahead of US PMI data release, trades higher around 17.20

• USD/MXN rebounds as US Dollar attempts to recover recent losses.
• Banxico maintained policy rates at the level of 11.25% in December’s meeting.
• Fed’s dovish stance contributed to undermining the Greenback.

USD/MXN halts a three-day losing streak as US Dollar (USD) makes efforts to retrace recent losses. The USD/MXN pair trades higher near 17.20 during the European session on Friday. However, the Mexican Peso (MXN) received upward support after the Bank of Mexico’s (Banxico) decision to hold policy rates at the level of 11.25%.

The Mexican economy persists in demonstrating resilience, as evidenced by the latest economic indicators. Inflation maintains a position above the Banxico target, emphasizing sustained economic strength. The recently released Industrial Output data for October further accentuates a robust performance in factories and manufacturing sectors.

The US Dollar continues to face downward momentum in the aftermath of the Federal Open Market Committee (FOMC) statement. The dovish stance adopted by the US Federal Reserve (Fed) regarding interest rates and the prospect of a more accommodative monetary policy in 2024 are key factors contributing to the sustained weakness in the Greenback.

The US Dollar Index (DXY) hovers around 102.00, accompanied by subdued US Treasury yields. As of now, the 2-year and 10-year US bond yields stand at 4.38% and 3.91%, respectively. Despite positive economic data from the United States (US), including Retail Sales and Initial Jobless Claims, the USD has not shown significant strength.

Investors now focus on the S&P Global Purchasing Managers Index (PMI) data scheduled for Friday, anticipating additional insights into the economic conditions in the United States to potentially drive market momentum.