USD/MXN rebounds from 17.70 amid solid appeal for USD Index, Fed Powell’s speech in focus

• USD/MXN has shown recovery from 17.70 amid strength in the USD Index.
• Fed Powell is expected to deliver interest rate guidance for June’s monetary policy meeting.
• Banxico decided to keep the interest rate policy steady after 15 consecutive interest rate hikes in the past two years.

The USD/MXN pair has shown a decent recovery after a minor correction to near 17.70 in the Asian session. The asset is expected to extend its upside further as the US Dollar Index (DXY) is gathering strength for shifting comfortably above the critical resistance of 103.60.

S&P500 futures added decent gains in Tokyo, continuing their two-day winning streak as investors are optimistic over approval of higher US debt-ceiling limit as a US Treasury default, which could impact United States leadership positions and credibility, is not an option. Investors are not worried anymore as if negotiations for US borrowing cap limit raise fail, US President Joe Biden could exercise his 14^th Amendment right in which nations’ debt will be paid regardless of debt-ceiling raise approval by Republican leaders.

The USD Index has gained traction ahead of the speech from Federal Reserve (Fed) chair Jerome Powell. Fed Powell is expected to deliver interest rate guidance for June’s monetary policy meeting. The Fed is widely expected to keep interest rates steady as fears of a recession are deepening amid tight credit conditions by US regional banks.

Small firms are struggling to meet their working capital requirements as US banks have tightened rules for disbursing loans to avoid the build-up of Non-Performing Assets (NPAs).

On the Mexican Peso front, the Bank of Mexico (Banxico) maintained the status quo and kept interest rates steady at 11.25% on Thursday. Banxico decided to keep the interest rate policy steady after 15 consecutive interest rate hikes in the past two years.