USD/MXN near 18.10 awaiting Banxico and the US PCE index.

• USD/MXN is defending its crucial support at 18.00 amid a USD rally.
• US consumer spending will take a hit this year amid recession fears and banking jitters.
• A rate hike of 25 basis points is expected by Banxico to 11.25%.

He USD/MXN moves slightly down just below the 18.10 level, at the start of the European session on Thursday. The pair is defending the psychological support at 18.00 amid a recovery move in the DXY Dollar Index. The dollar remains close to the previous day’s high at around 102.77. The mighty USD is gaining strength to break above that level for the hope that the Federal Reserve (Fed) will raise rates once more this year.

S&P 500 futures have recovered losses from the Asian session, reflecting a further improvement in risk appetite of market participants. The receding fears of further declines in the US banking system have weighed on demand for government bonds. Finally, the 10-year US Treasury yield shot up to 3.58%.

Looking to the future, the publication of data from the US Core Personal Consumption Expenditure (PCE) Price Index will continue to be the center of attention, scheduled for Friday. According to the consensus, household spending rose 0.4% in February, down from the previous rise of 0.6%. The annual core PCE price index is expected to remains stable at 4.7%.

The National Retail Federation (NRF) stated on Wednesday that recession fears and bank tremors cloud recovery in consumer spending, as reported by Reuters. The NRF expects retail demand growth in the range of 4-6%, less than the 7% expansion recorded in 2022. Therefore, the chances of a better-than-expected underlying PCE are less likely.

As for the Mexican peso, investors are awaiting the decision on the interest rate of Banco de México (Banxico). According to the consensus, Banxico will raise interest rates by 25 basis points (bp) to 11.25%.

USD/MXN technical levels