Fed week: Wednesday changes everything — or nothing at all

Há weeks where you already know on Sunday night which event is the one that matters. This is one of those. Wednesday is in charge — everything else is just warm-up noise.

The context

The peso arrives at this week in good shape: 17.22, VIX at 17.7, carry still well-compensated with the Banxico-Fed differential at +2.87%. Last week was a test — hot CPI, nerves, and in the end the market absorbed the blow without breaking. Now comes the real exam.

Wednesday's Fed

For this meeting the market expects no move on rates. The question is not what the Fed does on Wednesday but what it says — and specifically, how many additional hikes they are willing to project in the dot plot after a hot CPI. If the tone is "the data don't change the path" (what many call a hike that doesn't rattle markets), the market reads it as good news and the carry trade stays in play. If Powell comes out hawkish — signaling that the Fed needs to do more than the market thinks — the repricing can be swift and violent.

The peso across scenarios

Bull case (neutral Fed): USD/MXN breaks through 17.15–17.17, with the next target at 17.05–17.10. Carry remains king.

Base case (neutral Fed with caution): USD/MXN range 17.10–17.30, no clear direction until the market digests the dot plot. Carry intact.

Bear case (hawkish Fed): USD/MXN back to 17.40–17.50 in the hours that follow. Carry compresses and international funds begin to square up.

The Risk On index holds at 79 — where it finished last week. That is a comfortable place to head into the Fed: not so hot as to disappoint, not so cold as to sow panic. Whatever happens on Wednesday at 2pm ET moves it one way or the other.

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