USD/MXN holds positive ground below 18.00, focus on the US Retail Sales

• USD/MXN recovers some lost ground and hovers around 17.90.
• Chicago Fed and Philadelphia Fed President maintained their dovish stances, which weigh on the US Dollar.
• World Bank raised its economic growth projection for Mexico to 3.2% in 2023.
• Investors await the US Retail Sales for September.

USD/MXN posts modest gains around 17.90 during the Asian session on Tuesday. The rebound of the pair is bolstered by the renewed demand for US Treasury yields. In the absence of top-tier economic data released from Mexico, the USD/MXN pair remains at the mercy of USD price dynamics and risk sentiment. Furthermore, a rise in geopolitical tension between Israel and Hamas might cap the downside of the pair and boost the US Dollar (USD), a safe-haven asset.

That said, the dovish remarks from many Federal Reserve (Fed) officials weigh on the US Dollar (USD). Chicago Fed President Austan Goolsbee maintained his dovish stance by saying that a fall in US inflation is not a bleep, while Philadelphia Fed President Patrick Harker said that in the absence of some turn in the data, the Fed should hold rates steady.

Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD relative to a basket of foreign currencies, catches a minor bid into 106.30. The US Treasury yield recovers its losses, with the US 10-Y yield staying at 4.748% by press time.

About the data, the Federal Reserve Bank of New York revealed on Monday that the US NY Empire State Manufacturing Index for October dropped to 4.6 from the previous reading of 1.9 rise, beating the estimation of a 7.0 decline. Last week, the US Consumer Price Index (CPI) annually and monthly for September came in at 3.7% and 0.4%, respectively. Both figures exceeded market expectations.

In accordance with the International Monetary Fund (IMF), the World Bank raised its economic growth projection for Mexico to 3.2% in 2023. This forecast surpasses the Ministry of Finance of Mexico's expectations. It’s worth noting that the Bank of Mexico’s committee decided to maintain the interest rate at a record high of 11.25% for the fourth consecutive time at its September meeting, citing an uncertain inflationary outlook.

Looking ahead, the US Retail Sales will be released later on Tuesday, which is expected to rise 0.2%. The Fed speakers on Tuesday, including Williams, Bowman, Barkin, and Kashkari, could offer some hints about further monetary policy paths. On Friday, Mexico's Retail Sales for August will be due. Traders will take cues from these data and find trading opportunities around the USD/MXN pair.