USD/MXN rises to near 17.24 as Fed Powell dismissed the March rate cut

• USD/MXN edges higher on Fed Powell’s hawkish remarks on interest rate trajectory.
• Banxico may consider an interest rate cut in March on slower growth of Mexican GDP.
• US Dollar could face a challenge as US labor data is expected to slow down.

USD/MXN moves in an upward direction on stronger US Dollar (USD), which could be attributed to the Federal Reserve (Fed) Chairman Jerome Powell’s dismissal of the March rate cut. The USD/MXN pair edges higher to near 17.24 during the European hours on Thursday.

The Mexican Peso (MXN) experiences losses in light of expectations that the Bank of Mexico (Banxico) may contemplate a reduction in interest rates during its March meeting as the Mexican Gross Domestic Product (GDP) figures for the fourth quarter increased but were lower than anticipated. The market sentiment suggests a cautious approach by the Banxico regarding interest rate adjustments. However, the markets have already factored in the possibility of no interest rate adjustment in the upcoming February policy meeting.

The improved United States (US) yields are reinforcing the strength of the US Dollar due to the positive market sentiment surrounding the Fed’s interest rate trajectory. The US Dollar Index (DXY) inches higher around 103.70 with the improving 2-year and 10-year yields on US bond coupons at 4.23% and 3.94, respectively, by the press time.

However, the Greenback faced challenges after the release of disappointing-than-expected US employment figures on Wednesday. The US ADP Employment Change reported 107K for January, falling short of the expected 145K, with the previous reading at 158K in December. Thursday is expected to capture attention with key economic indicators, including US Initial Jobless Claims, Nonfarm Productivity, and ISM Manufacturing PMI.