USD/MXN grapples to extend losses, remains below 16.60

• USD/MXN receives pressure following Fed Chair Powell's reaffirmation of the Fed's stance on rate cuts in 2024.
• The decline in Mexico’s Jobless Rate has enabled Banxico to uphold tight borrowing conditions to tackle inflation.
• US ISM Manufacturing PMI is anticipated to improve to 48.4 in March, from 47.8 prior.

USD/MXN maintains its position below 16.60, attempting to extend losses for the second successive session on Monday. The Mexican Peso (MXN) has strengthened as the domestic Jobless Rate unexpectedly declined to 2.5%, reaching an eleven-month low and surpassing expectations of 2.8%. This positive development has enabled the Bank of Mexico (Banxico) to uphold tight borrowing conditions in its efforts to tackle persistent inflation.

Inflation has risen to 0.27% and 0.33% for both headline and core measures, respectively, in the first half of March. Additionally, traders will eagerly await the release of Consumer Confidence data for March, scheduled for Thursday.

The US Dollar Index (DXY) encounters difficulties amid lower US Treasury yields, hovering around 104.50, with the 2-year and 10-year yields on US bond coupons standing at 4.59% and 4.19%, respectively, at the time of writing. The US Dollar (USD) is facing challenges following dovish remarks made by Federal Reserve (Fed) Chairman Jerome Powell on Friday.

Fed Chair Powell indicated that the recent Personal Consumption Expenditures Price Index (PCE) data from the United States (US) met expectations, reaffirming the Fed's stance on potential interest rate cuts for the year. Fed officials maintain projections of three rate cuts for the year, with market participants expecting the first of these cuts to occur at the June meeting.

Traders may adopt a cautious stance ahead of the release of the ISM Manufacturing Purchasing Managers Index (PMI) data from the United States (US) scheduled for later in the North American session.