USD/MXN edges lower near 17.10 despite the dovish Banxico outlook, US data eyed

• USD/MXN retraces its recent profits despite the dovish Banxico’s outlook.
• Mexico’s Retail Sales MoM rose to 0.8%, while year-on-year improved to 3.4%.
• US Dollar demonstrates weakness despite the Fed’s dismissal of rate cut speculations.

USD/MXN trades lower near 17.10 during the European session on Thursday. However, the USD/MXN pair received upward support as improved data from the United States (US) dampened the upbeat Mexico’s Retail Sales data on Wednesday.

Mexico’s Retail Sales (MoM) rose to 0.8% against the flat 0.0% as expected in October, swinging from the previous 0.2% decline. While Retail Sales year-on-year improved to 3.4% versus 2.0% readings and 2.3% previously. 1st half-month Inflation data for December are due on Thursday.

However, the dovish comments from Bank of Mexico (Banxico) Governor Victoria Rodriguez Ceja seem failing to affect the resilience of the Mexican Peso (MXN). Governor Ceja commented on the decline in inflation, highlighting the potential consideration of interest rate cuts in the first quarter of 2024 if the disinflationary trend persists.

On the US side, market participants await key economic releases later in the North American session for further insights into the US economy. These include US Gross Domestic Product Annualized (Q3), Initial Jobless Claims, and the Philadelphia Fed Manufacturing Survey.

On Wednesday, the US Existing Home Sales Change indicated a notable monthly rate increase of 0.8% in November. CB Consumer Confidence experienced substantial growth in December, marking the most significant increase to 110.07.

The US Dollar (USD) experiences a decline even though several Fed officials have discouraged premature speculations on policy rate cuts in early 2024. Also, the higher US Treasury yields failed to feed strength into the USD. The DXY moves sideways near 102.30, with the 2-year and 10-year yields on US bond coupons are at 4.37% and 3.87%, respectively, at the time of writing.