USD/MXN holds losses near 18.50 following Banxico's rate cut, US PCE Price Index eyed

• USD/MXN could rebound as the Mexican Peso faces pressure amid expectations of additional rate cuts.
• Banxico opted for a 25-basis-point rate cut in September amid persistent concerns over global trade tensions.
• The US Dollar could receive support as strong economic data may slow the Fed's interest rate cuts.

USD/MXN depreciates after two days of gains, trading around 18.50 during the Asian hours on Friday. However, the pair may regain its ground as the Mexican Peso (MXN) may face challenges amid expectations of further rate cuts following a 25-basis-point rate cut by the Bank of Mexico (Banxico) on Thursday, as widely expected. Focus shifts toward Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve's preferred inflation gauge, due later on Friday.

The Banxico decided to bring its interest rate to 7.5%, its lowest level since May 2022, amid ongoing concerns about global trade tensions and sluggish economic growth in the country. The Mexican central bank stated that it considered "weak economic growth" and volatile global trade policies when deciding to lower borrowing costs.

China's Commerce Ministry on Thursday launched an anti-dumping investigation into pecans imported from the United States (US) and Mexico, highlighting growing global trade tensions with the two North American countries, per Reuters.

The US Dollar (USD) may gain ground as robust economic data may prompt the US Federal Reserve (Fed) to adopt a more cautious approach to cutting interest rates. The US Gross Domestic Product (GDP) Annualized grew 3.8% in the second quarter (Q2), coming in above the previous estimate and the estimation of 3.3%. Meanwhile, the GDP Price Index rose 2.1% in the same period, as compared to the expected and previous 2.0% growth. US Initial Jobless Claims declined to 218K last week, the lowest since July. The market expectations were an increase to 235K from 232K previously.