USD/MXN remains sideways below 17.70 as US Employment comes under spotlight

• USD/MXN is trading lackluster below 17.70 despite the USD index remaining extremely volatile.
• Clearance of US debt-ceiling bill in Congress has sent US Treasury yields on fire.
• The US ISM is set to report a seventh consecutive contraction in Manufacturing PMI.

The USD/MXN pair is displayed a sideways auction below 17.70 in the early European session. The asset is continuously trading lackluster despite immense volatility in the US Dollar Index (DXY). The USD Index has extended its recovery move above the crucial resistance of 104.30 as one more interest rate hike from the Federal Reserve (Fed) in its June monetary policy meeting is widely anticipated.

S&P500 futures are continuously adding gains from the Asian session as US debt-ceiling bill has hot clearance from Congress and fears of a default by the United States have been completely shrugged off. This has sent US Treasury yields on fire. The 10-year US treasury yields have climbed above 3.67%.

USD/MXN could turn volatile ahead as the United States Automatic Data Processing (ADP) Research Institute will report May’s Employment Change data. According to the consensus, the US economy added 170K jobs in May vs. April’s addition of 296K. A slowdown in the hiring process might ease some heat from labor market conditions, however, the fact that overall employment conditions are healthy cannot be ruled out. This will keep hopes of further policy-tightening by the Federal Reserve (Fed) extremely solid.

In addition to the US Employment data, ISM Manufacturing PMI will also remain in the limelight. As per the estimates, US ISM is set to report a seventh consecutive contraction in Manufacturing PMI. The economic data is seen landing at 47.0 and a figure below 50.0 is itself considered a contraction.

On the Mexican Peso front, investors will keep focusing on the Unemployment Rate, which will release on Friday. Mexico’s jobless rate (April) is seen higher at 2.7% vs. the prior release of 2.4%, which could be the consequence of higher interest rates by the Bank of Mexico (Banxico). Investors should note that Banxico has pushed interest rates to 11.25% in its battle against persistent inflation.