USD/MXN rebounds near 17.33 on improved US Dollar, focus on Fed policy

• USD/MXN retraces recent losses ahead of the Fed policy decision.
• As-expected US CPI data diminishes the likelihood of rate cuts soon.
• Mexico's Industrial Output data showed resilience, recording a 5.5% increase in yearly output and a 0.6% uptick in the monthly report.

USD/MXN navigates around 17.33 during the European session on Wednesday, making attempts to recover from recent losses registered in the previous session. The support for the US Dollar (USD) comes from positive US Treasury yields, leading up to the Federal Reserve's (Fed) Interest Rate Decision. The anticipation is that the Federal Open Market Committee (FOMC) will maintain its current policy stance in the December meeting.

The US Dollar had a brief dip and subsequent recovery following the release of moderate Consumer Price Index (CPI) data from the United States on Tuesday. The US Bureau of Labor Statistics reported a 0.1% month-on-month and 3.1% year-on-year increase in the US Consumer Price Index (CPI) for November. The US Core CPI also showed a 0.3% month-on-month and 4.0% year-on-year uptick. These figures aligning with market expectations suggest that inflation is tracking as predicted, suggesting no interest rate cuts by the Fed any time sooner.

On Mexico's side, the Industrial Output data released by INEGI reveals a robust performance in factories and manufacturing in October, with a yearly output increase of 5.5% from 4.0%, surpassing the market expectations of 4.6% and showing resilience. The monthly report also defied expectations, demonstrating growth of 0.6% instead of the anticipated decline of 0.1%.

Looking ahead, the upcoming announcement of the Bank of Mexico's (Banxico) key interest rate on Thursday is expected to maintain cash rates at the unchanged level of 11.25%.