Broad risk-off: peso retreats as markets brace for PCE and Banxico decision

Good morning!

The signal of the day: coordinated risk-off, not isolated noise

What we are seeing this morning is not a move in a single asset — it is a coordinated selloff that speaks to genuine repositioning. The S&P 500 falls 1.44% with ES futures confirming the premarket pressure (-1.34%), WTI retreats 2.34% to $73.07, gold drops 1.27% to 4,129 and Bitcoin loses 2.41%. When risk assets fall in unison — equities, commodities and crypto simultaneously — the read is clear: the market is reducing exposure ahead of events with the capacity to shift the macro narrative. The VIX at 19.49 is not in panic territory, but it does mark a notable jump relative to the recent range, and the MOVE at 68.78 confirms that fixed income is not comfortable either.

The peso and the carry: positive differential, but under pressure

USD/MXN is trading at 17.5360 (+0.99%), dangerously approaching the technical resistance at 17.6050. The carry differential of 2.87pp (Banxico 6.50% vs. Fed 3.63%) remains positive and has been the peso's anchor in recent months, but on days of broad risk-off the carry loses its cushioning capacity: when everyone wants to reduce EM exposure, the rate differential takes a back seat. The realized volatility in USD/MXN of 7.33% reflects that the pair is active — not dormant. The relevant support sits at 17.1459; as long as spot does not return below 17.30, the short-term bias favors the dollar. My view: in this environment, the bias favors hedges in pesos for importers and treasurers with long dollar exposure; at the same time, aggressively selling the peso from these levels does not look attractive either, given that the carry is still paying and any favorable data on Friday could reverse part of the move quickly.

Rates and the curve: the long end is speaking

The UST curve shows a positive 2s10s slope of +27bp — a moderate bear steepening. The 10Y at 4.49% and the 30Y at 4.95% are absorbing the uncertainty around the inflation path. The short end (1M at 3.66%, 3M at 3.85%) remains anchored to Fed expectations at 3.63%, while the market pushes term premiums higher. This steepening is not a signal of euphoria — it is the market demanding greater compensation for duration risk in a context where Friday's PCE could reconfirm that inflation is not dead. For Mexico, if Banxico cuts 25bp on Friday as the market is pricing, the TIIE28 would move from 6.76% toward more compressed territory, tightening the differential with the Fed and structurally pressuring the carry.

The path ahead: Friday is the hinge day

June 26 concentrates the two most relevant events of the week: the U.S. PCE (personal consumption expenditures) and the Banxico decision. A hot PCE combined with a Banxico cut is the most adverse combination for the peso: it widens the hawkish-dovish gap between the Fed and Banxico precisely when the carry is already compressing. The reverse scenario — an in-line or soft PCE combined with a cautious Banxico statement — could stabilize the exchange rate near resistance. Non-farm payrolls on July 3 will be the next catalyst if the week closes without a clear direction. With the Risk On Score at 39/100 — DEFENSIVE state — the framework is one of structured caution: the market is not in crisis, but it is not buying risk either. For the peso, that is precisely the environment where realized volatility can escalate without warning.

— See you tomorrow with the Thursday view.