USD/MXN moves lower to near 17.16 ahead of Mexico Retail Sales, US Consumer Sentiment

• USD/CAD moves sideways with a positive bias toward an upward direction.
• US Dollar rose as investors’ sentiment toward Fed rate cuts diminished.
• The upcoming US and Mexican elections could put further pressure on MXN.

USD/MXN trims its intraday gain and continues its losing streak for the third straight session, trading near 17.16 during the European trading hours on Friday. However, the US Dollar (USD) received upward support as market participants have trimmed their bets on speculation of early interest rate cuts by the Federal Reserve in March, which could be attributed to the robust key economic data from the United States (US).

Additionally, the geopolitical tension in the Middle East turned the investors’ sentiment into risk aversion, which caused the increased demand for the US Dollar (USD). Additionally, the higher US bond yields contribute support to underpinning the Greenback. The 2-year and 10-year yields on US bond coupons trade at 4.35% and 4.15%, respectively, by the press time.

US Federal Reserve Bank of Atlanta President Raphael Bostic delivered remarks on Thursday at an event hosted by the Atlanta Chamber of Commerce. Bostic mentioned that the Fed's base case is to contemplate rate cuts in the third quarter, while also leaving open the possibility for an earlier commencement of the rate cut cycle, depending on inflation figures. Furthermore, traders will closely watch the US preliminary Michigan Consumer Sentiment Index, anticipating an improvement in January.

On Mexico’s side, markets have a sentiment that the upcoming 2024 elections in both Mexico and the US could potentially put further pressure on the performance of the Mexican Peso. Throughout the week, Mexico's economic calendar did not feature notable events, and market participants are now looking forward to the release of November's Retail Sales data on Friday. Projections indicate a month-over-month and year-over-year decrease at 0.5% and 3.2%, respectively, falling short of the previous figures.