USD/MXN continues to lose ground on the weaker US Dollar, hovers below 17.00

• USD/MXN extends its losses as the US Dollar retreats after recent gains.
• The downbeat US bond yields limit the advance of the Greenback.
• Traders await next week's Consumer Confidence and Headline Inflation data from Mexico.

USD/MXN extends to the downward on the decline of the US Dollar (USD). The downbeat United States (US) Treasury yields put downward pressure on the Greenback. The USD/MXN pair trades lower around 16.98 during the European session on Thursday.

However, the better-than-expected ISM Manufacturing PMI data contributed support to the market sentiment against the speculation of interest rate cuts by the US Federal Reserve (Fed) in the first quarter of 2024, which strengthened the Greenback. The report revealed an increase to 47.4 in December from the previous reading of 46.7, exceeding the market consensus of 47.1.

Investors are expected to closely scrutinize Thursday’s labor market releases from the United States for insights into the current state of the US labor market. The market expects an increase in US ADP Employment Change for December, from the previous figure of 103K to 115K. Additionally, the forecasted easing of Initial Jobless Claims for the week ending on December 29, from 218K to 216K, adds support to the bets of no rate cuts by the Fed in the upcoming meeting.

On Mexico’s side, the recent moderate data might alleviate the pressure on the Bank of Mexico (Banxico) to implement an immediate reduction in interest rates. Despite the stability of the Jobless Rate, the seasonally adjusted Jobless Rate experienced a slight uptick.

With no data releases from Mexico during the week, traders anticipate next week's Consumer Confidence and Headline Inflation data for December. These upcoming releases will likely play a crucial role in shaping market expectations and influencing Banxico's decisions regarding monetary policy.