USD/MXN trades lower near 17.14, US housing, Mexican Retail Sales data eyed

• USD/MXN moves on a downward trajectory on anticipations of Fed interest rate cuts in the upcoming year.
• Mexican Peso gains ground despite the dovish remarks from the Banxico Governor Victoria Rodriguez Ceja.
• US Federal Reserve Bank of New York President John Williams rejected the notion of a potential rate cut in March 2023.

USD/MXN extends its losses on another day, edging lower near 17.14 during the early European hours on Tuesday. The Mexican Peso (MXN) demonstrates resilience against the US Dollar (USD) despite the dovish remarks from the Bank of Mexico (Banxico) Governor Victoria Rodriguez Ceja.

Governor Ceja commented on the decline in inflation, highlighting that if the disinflationary trend continues to persist, they might consider cutting interest rates in the first quarter of 2024. The Banxico maintained its forecast of inflation returning to its 3% target in 2025.

The US Dollar Index (DXY) attempts to retrace its recent losses on the back of improved US Treasury yields. The DXY hovers around 102.50, with 2-year and 10-year yields on US Treasury bonds standing at 4.45% and 3.92%, respectively, at the time of writing.

The Federal Reserve's (Fed) relatively moderate statement, coupled with dovish comments from various Fed members, fueled speculation about interest rate cuts in the first quarter of 2024. However, US Federal Reserve (Fed) Bank of New York President John Williams dismissed the idea of a potential rate cut in March. Additionally, San Francisco Fed President Mary Daly emphasized that speculating about interest rate cuts in the upcoming year is premature.

Investors await key economic indicators, with Building Permits and Housing Starts from the United States (US) taking center stage on Tuesday. On the Mexican front, Retail Sales data will be eyed.