FOMC tomorrow, yields climbing and S&P in the red: markets demand caution

The signal of the day: pre-FOMC compression with a risk-off undertone

When the S&P 500 falls 1.21%, the US 10Y rises 5+ bps, WTI collapses nearly 4%, and Bitcoin loses 2.63% in the same session, the market's message is clear: no one wants to carry risk 24 hours before the Fed opens its mouth. The VIX at 18.44 is not in panic territory, but it is not in complacency either — it is the level of someone buying protection, not selling volatility. The MOVE at 70.66 confirms that the rates market is also on guard. This is a market that is reducing exposure, not making directional bets.

The peso and the carry: floating, but not flying

USD/MXN is trading at 17.2680, up just 0.36% — a modest depreciation that, in the context of global risk-off, speaks well of the anchor still provided by the carry. With Banxico at 6.50% and the Fed at 3.63%, the 2.87pp differential remains attractive in absolute terms, although the compression from the carry's historical highs — which at one point exceeded 5pp — limits enthusiasm. The realized vol. on the pair at 7.12% is low: the peso is not being attacked, it is being monitored. My market view here is that as long as the pair holds below 17.40 and the FOMC does not surprise hawkish, the carry bias continues to favor the peso in the near term — but the risk asymmetry is skewed to the upside in USD/MXN for tomorrow. The relevant support sits at 17.1459 and the resistance to defend at 17.5192.

Rates and the curve: the steepening that unsettles

The UST curve has a positive slope of 38bps in the 2s10s segment — technically a healthy curve, but the detail lies in the speed: the long end is selling ahead of the FOMC, which is not dovish. The 30Y at 4.93% is beginning to approach levels that have historically generated friction for emerging-market risk assets. The TIIE28 at 6.75% with Banxico at 6.50% reflects the local liquidity premium — and Banxico's decision on June 26 will be the next domestic pivot. With the Fed potentially on pause and Mexican inflation still having work to do, the market likely expects Banxico to follow the Fed with a lag of one or two moves.

Looking ahead: the calendar is in charge

The risk map for the next 10 days is dense: the FOMC and the BoE tomorrow, the US PCE on the 26th, and Banxico on the same day. The FOMC + BoE combination within 24 hours is an implied volatility event for the DXY and EM crosses. If Powell reiterates patience and the dots do not move aggressively, relief could come quickly and the peso could recover. If the tone is more restrictive than expected, the DXY — at 100.28 today — has room to rebound and USD/MXN could test the resistance zone. Gold at 4,344 (down 0.34% today) shows that even safe havens are taking profits ahead of the event — a signal that uncertainty is bidirectional, not unidirectional.

The Risk On Score today is 42/100: DEFENSIVE. The breakdown is telling — the direction of the peso, US equities, and Bitcoin clearly subtract points, while the carry and low realized vol. provide a cushion. This is not a broken market, but it is one that demands respect for event risk. The watchword for today: reduce noise, maintain clarity on key levels, and wait for the Fed to speak first.

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