Constructive risk-on: firm peso, positive curve and a week packed with PCE and Banxico

Good start to the week!

Signal of the day: equities set the pace, volatility in quiet mode

Monday kicks off with a clear risk-appetite signal. The S&P 500 closed Friday at 7,501 (+1.08%) and ES futures add another +0.64% in premarket, pointing to a rally with conviction rather than an opportunistic technical bounce. The VIX at 16.78 and the MOVE at 65.39 confirm that both equities and bonds are trading with cheap hedges and no signs of systemic stress. Gold gives back 1.21% to 4,173 — typically a read that money is rotating toward risk assets rather than seeking shelter. Bitcoin flat at 63,010 neither adds to nor detracts from the narrative. Taken together, the market is in constructive mode, not euphoric mode; that distinction matters.

The peso and carry: relative efficiency at attractive levels

USD/MXN at 17.3150, down 0.23%, is the logical consequence of the environment described above. With the DXY at 100.85 — lacking a clear dominant trend — and the carry differential at 2.87pp (Banxico 6.50% vs. Fed 3.63%), the peso has fuel to stay well bid as long as there is no exogenous shock. Realized volatility on USD/MXN at just 7.09% makes carrying this position relatively cheap in hedging terms. The technical range is clear: support at 17.1459 and resistance at 17.4865. My market read is that as long as the DXY does not break 102 with conviction and the S&P does not lose momentum, the bias favors the peso within that range, with a tilt toward the lower end. That said, the week carries meaningful event-driven risk that can shift the dynamics from one day to the next.

Rates and curve: moderate steepening, mixed signal for emerging markets

The UST curve shows a contained bull steepening: the 1M at 3.68%, the 2Y at 4.20%, and the 10Y at 4.45%, with the 2s10s spread at +29bps — positive, but still far from a full normalization post-inversion. This suggests the market is pricing Fed cuts in the near term while remaining cautious on the long end due to fiscal pressures or persistent inflation. For Mexico, a moderately positively sloped UST curve is a tolerable environment: there is no violent repricing of the long end that would raise global funding costs. The TIIE28 at 6.75% keeps the domestic differential relevant.

The road ahead: PCE and Banxico define the next chapter

The week has one focal date: Friday, June 26. Two high-impact events on the same day. First, US PCE — if it comes in above consensus, the Fed's dovish narrative weakens, the dollar bounces, and carry loses relative appeal instantly. Second, and more locally, the Banxico decision: with the rate at 6.50% and the cutting cycle active, the market will be closely watching whether the board opts for another 25bps cut or pauses based on domestic inflation data and the external context. A Banxico pause would be technically positive for peso carry, although it could be read as a signal of caution regarding the Mexican economic cycle.

The Risk On Score today is 72/100 — CONSTRUCTIVE. The highest-weight components (VIX, USD/MXN, S&P) are positively aligned, carry is functional, and implied volatility is not sending any warning signals. The base case for today is a continuation of positive momentum, but with close attention on Friday's catalysts.

— See you tomorrow with the Tuesday view.