USD/MXN loses momentum below the 16.80 area ahead of Mexico’s GDP, US CB Consumer Confidence

• USD/MXN loses momentum near 16.77 amid the USD weakness.
• Federal Reserve (Fed) Chairman Jerome Powell said that additional rate hikes cannot be ruled out if required.
• Banxico’s policymakers cited the potential additional rate hikes to ease inflationary pressures.
• Market players will keep an eye on Mexico’s GDP, US CB Consumer Confidence.

USD/MXN extends its downside during the early European session on Tuesday. The pair currently trades around 16.77, losing 0.11% on the day. Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD against six other major currencies, loses traction for the second consecutive day. Market participants await the US top-tier economic data and Mexican Gross Domestic Product (GDP) for the second quarter for fresh impetus.

Regarding the Jackson Hole Symposium, Federal Reserve (Fed) Chairman Jerome Powell stated that the additional rate hike cannot be ruled out if required, it would be determined by incoming data. According to World Interest Rates Probabilities (WIRP), the market discounts modest odds of a hike in September, but the probability of a 25 basis point (bps) hike in November increased to nearly 70%. About the data, the US Dallas Federal Reserve Manufacturing Index for August rose to -17.2 from -20 prior, better than the estimation of -21.6.

On the other hand, Banxico’s policymakers cited the potential additional rate hikes to ease inflationary pressures. This, in turn, boosts the Mexican Peso (MXN) against the US dollar and acts as a headwind for USD/MXN. Furthermore, Mexico, Latin America’s second-largest economy, will release GDP data on Tuesday. The annual growth figure is expected to remain unchanged at 3.7% while the monthly figure is expected to grow 0.9%.

Market participants will also monitor the US CB Consumer Confidence for August and JOLTs Job Opening for July due later in the day. The attention will shift to the highly anticipated Nonfarm Payrolls data on Friday. Traders will take cues and find trading opportunities around USD/MXN.