USD/MXN holds ground near the 17.00 mark, Mexico rate decision eyed

• USD/MXN holds ground near 17.08, down 0.11% for the day.
• Recent Federal Reserve (Fed) comments signalled a shift from rate hikes to holding them steady.
• Market players will closely watch the interest rate decision by Banxico on Thursday.

USD/MXN struggles to gain and holds above the 17.00 mark heading into the early European session on Wednesday. Market participants await the Mexican Consumer Price Index (CPI) data due later on Wednesday ahead of the monetary policy meeting by Banxico on Thursday. At the time of writing, the USD/MXN is trading at 17.08, with losses of 0.11%.

The US trade data show a sluggish economic rebound and subdued global demand in the country. The US trade deficit narrowed sharply in June, with the figure coming in at $65.5 billion, higher than expectations of $65 billion and below the $68.3 billion prior. Imports fell 1.0% to $313 billion from $316.1 billion the previous month, the lowest level since November 2021. While, Exports dropped 0.1% to $247.5 billion, a 15-month low.

The recent commentary from Federal Reserve (Fed) speakers indicated that the Fed stance has shifted from additional rate hikes to holding rates steady. The Philadelphia Fed president, Patrick Harker stated that the central bank can leave interest rates where they are. Meanwhile, Atlanta Fed president Raphael Bostic states that no further rate hikes are necessary.

Additionally, Moody's downgraded the credit ratings of several small to mid-sized US banks and issued a warning about possible cuts to the ratings of larger institutions. The giant credit rating company stated that the higher interest rates have also elevated the prospect of a recession, putting pressure on the banking industry as well as real estate to adapt to post-pandemic reality.

Market players will closely watch the interest rate decision by Banxico on Thursday. Markets anticipate Mexico's central bank to hold the interest rate unchanged at 11.25%. This event could give a clear direction to the USD/MXN pair. Apart from this, the highlight will be the US Consumer Price Index (CPI) and the Producer Price Index (PPI) for July, due on Thursday and Friday, respectively.