Peso holds firm, carry intact, S&P futures surge: constructive open

Happy Monday — let's get the week going!

The Day's Signal: Risk-On With Caveats

We kick off the final week of June with an environment the model rates CONSTRUCTIVE (60/100), and the data backs it up — with a few asterisks. S&P futures are up +0.85% in premarket, recouping nearly all of Friday's cash session loss (-0.05%), and VIX at 18.22 sends no alarm signals. The MOVE index at 66.79 also confirms that rates markets are not in panic mode. It's a Monday with thin volume due to mid-year book-squaring, which can amplify intraday swings; be careful about over-reading the morning tape.

The Peso and Carry: Solid Anchor, Well-Defined Range

USD/MXN trades at 17.4980, essentially flat (-0.07%), comfortably within the technical range of support 17.1669 / resistance 17.6732. The peso has been trading in a low realized vol regime — 7.78% — which historically is a comfortable level that doesn't incentivize aggressive hedging flows. The Banxico-Fed spread of 2.87pp (Banxico 6.50% vs Fed 3.63%, TIIE28 at 6.75%) remains the structural case for carry positions. DXY at 101.24 isn't providing the dollar with meaningful upside momentum, and EUR/MXN's +0.28% move to 19.9505 reflects broader dollar softness across crosses rather than euro strength. My near-term directional bias: with the carry differential still robust, a DXY lacking clear bullish momentum, and pre-market risk appetite improving, the short-term bias favors the pair remaining contained within range or drifting toward the lower end. It's not an aggressive call — the calendar caps conviction — but carry remains the anchor.

Rates and Curve: Watch the Steepening

The UST curve is in bear steepening mode: the 10Y at 4.38% is up 9bps while the short end stays more anchored (2Y at 4.09%). The 2s10s spread widens to 31bps in positive territory — a signal that the market is beginning to price either a longer cycle or increased term premium. This matters for Mexico because pressure on the long end of Treasuries can eventually bleed into Mbonos and create noise in financing costs. For now the MOVE at 66.79 suggests no dislocation, but the 10Y crossing toward 4.50% is worth monitoring closely.

The Road Ahead: NFP and Mexico CPI Are in the Driver's Seat

The two high-impact events defining the tone for July are crystal clear: NFP on July 3rd and Mexico CPI on July 9th. A strong U.S. jobs print would reopen the debate around the Fed's cutting pace — flattening the dovish narrative and supporting the dollar — while a weak reading would consolidate the rate-cut scenario and could push USD/MXN toward support. On the Mexico side, INEGI's inflation release on the 9th arrives at a moment where Banxico has already cut to 6.50%; an upside surprise would slow the cutting cycle and add a bit of extra muscle to the carry trade. WTI approaching $70 adds a supportive factor for Mexico's terms of trade and for broad EM risk appetite. The Risk On Score of 60/100 — CONSTRUCTIVE precisely captures this balance: there's no euphoria, but the context doesn't justify aggressively defensive positioning either. It's a transitional week with a light calendar through Thursday — use it to build conviction before the NFP lands.

— See you tomorrow for Tuesday's view.