USD/MXN inches lower near 17.06 ahead of Mexico Retail Sales

• USD/MXN continues to lose ground despite the dovish Banxico.
• Mexico Retail Sales (MoM) are expected to be flat at 0.0% and yearly data to ease at 2.0%.
• US Dollar remains stable despite downbeat US bond yields.

USD/MXN extends its losses for the third successive day, stretching lower near 17.06 during the European hours on Wednesday. Mexico’s Retail Sales data for October is set to be released on Wednesday. The monthly change is expected to be flat at 0.0% against the decline of 0.2% in September. While yearly data is predicted to ease at 2.0% against the 2.3% prior.

Additionally, despite the dovish comments from Bank of Mexico (Banxico) Governor Victoria Rodriguez Ceja, the Mexican Peso (MXN) showed resilience against the US Dollar (USD). Governor Ceja remarked on the decrease in inflation, pointing out that if the disinflationary trend persists, there's a possibility of contemplating interest rate cuts in the first quarter of 2024.

On the other side, Federal Reserve (Fed) Bank of New York President John Williams presented a counterpoint, opposing the speculation surrounding a potential rate cut in March by the Federal Open Market Committee (FOMC). Additionally, San Francisco Fed President Mary Daly emphasized that making predictions about the policy stance for the upcoming year is premature. In a Wednesday morning interview on Fox TV, Austan Goolsbee, President of the Federal Reserve Bank of Chicago, echoed a similar sentiment, cautioning that the market's optimism for interest rate cuts may have gone beyond realistic expectations.

The US Dollar Index (DXY) trades higher around 102.20, receiving the downward pressure on a dovish sentiment surrounding the US Federal Reserve (Fed), indicating the potential for rate cuts in early 2024. Furthermore, the downbeat US Treasury yields contribute to pressure to undermine the Greenback. The 2-year and 10-year yields on US Treasury bonds inch lower to 4.39% and 3.89%, respectively, at the time of writing.