USD/MXN falls below 18.80 as US Dollar remains subdued ahead of Nonfarm Payrolls

• USD/MXN loses ground as the US Dollar struggles amid increasing odds of the Fed cutting interest rates.
• Traders await the US Nonfarm Payrolls, which is expected to increase by 110,000 in June.
• The Mexican Peso gained support after Banxico indicated that additional rate cuts would be considered if inflation continues to decline.

USD/MXN edges lower after registering gains in the previous two successive sessions, trading around 18.80 during the European hours on Thursday. The pair depreciates as the US Dollar (USD) loses ground amid rising expectations that the Federal Reserve (Fed) will cut interest rates, driven by the downbeat ADP national employment report.

US ADP Employment Change fell for the first time in more than two years in June. The private-sector payrolls decreased by 33,000 in June after a downwardly revised 29,000 gain in May. This figure came in below the market consensus of 95,000.

Traders await highly anticipated labor market data, including US Nonfarm Payrolls (NFP) and Average Hourly Earnings, due later in the day. Moreover, ISM Services PMI and S&P Global US PMI will also be eyed on Thursday.

The Mexican Peso (MXN) received support as Banxico signaled that further rate cuts would only occur as inflation eases, keeping an attractive real interest rate. Additionally, the confidence is bolstered in the MXN as Mexico's Fiscal Balance reported a $1.03 billion trade surplus in May, driven by a 1.8% rise in non-oil exports, while remittance inflows hit a record $5.5 billion.

However, Mexico's S&P Global Manufacturing Purchasing Managers Index (PMI) declined to 46.3 in June, compared to the previous reading of 46.7. The reading marked the weakest quarterly average since early 2021, highlighting a sharp decline in new orders as companies cited sluggish demand, project delays, and the effects of US tariffs. Consumer Confidence for June will be eyed later in the day.