USD/MXN remains on the defensive near 19.00 ahead of US CPI release

• USD/MXN softens to around 19.05 in Wednesday's early European session. 
• The US and Mexico discussed a deal to cut Trump's steel tariffs. 
• Traders await the US May CPI inflation data later on Wednesday. 

The USD/MXN pair remains on the defensive near 19.05 during the early European session on Wednesday. The Mexican Peso (MXN) strengthens against the US Dollar (USD), its strongest level in more than nine months, bolstered by a potential trade deal between the United States and Mexico. 

The United States and Mexico are discussing a deal to reduce or remove US President Donald Trump's 50% steel tariffs on imports up to a certain volume, per Reuters. The agreement hasn't been finalized, however, an industry source familiar with the talks said that it would allow US companies to import Mexican steel tariff-free as long as total shipments are kept below a level based on historical trade volumes.

Traders will keep an eye on the US May Consumer Price Index (CPI) inflation data, which is due later on Wednesday. The headline CPI is expected to see an increase of 2.5% YoY in May, while the core CPI is estimated to see a rise of 2.9% YoY in the same period. If the report shows softer inflation in the US economy, this might drag the Greenback lower.

On the other hand, the US Federal Reserve (Fed) will keep interest rates on hold for at least another couple of months, according to Reuters polls, citing inflation risks triggered by Trump's tariff policies. All but two of the 105 economists in the June 5-10 Reuters poll forecast that the US central bank would keep the Fed Funds Rate unchanged at its June meeting in a 4.25%-4.50% range, where it has been since the start of the year. The cautious stance of the Fed might lift the USD in the near term.