Peso Under Mild Pressure but Carry Intact: Market in CONSTRUCTIVE Mode as 2H26 Kicks Off

Good morning!

The Day's Signal: First Day of H2, Tempered Optimism

We kick off July — the formal start of the second half of 2026 — with a market that can't quite commit to either risk-on or caution. The S&P 500 closed yesterday at 7,499 (+0.79%), a record level reflecting accumulated momentum, but ES futures are already retreating -0.28% in premarket, suggesting today's session may lean toward consolidation rather than extension. A VIX at 16.79 and MOVE at 71.96 confirm there's no panic in the system, but no euphoria either. Gold at 4,039 (+0.39%) continues to nuance the optimism: when the metal rises alongside equities, the market is buying both growth and protection. That's not pure risk-on — it's caution dressed up as a rally.

The Peso and Carry: Anchor Holding, Surface Noise Present

USD/MXN trades at 17.5455 (+0.42%), moving comfortably within the technical range defined by support at 17.2355 and resistance at 17.6732. Today's move is orderly: the DXY at 101.54 explains most of the pressure, and there are no signals this is a structural shift against the peso. The 2.87pp carry (Banxico 6.50% vs. Fed 3.63%, TIIE28 at 6.76%) remains the central argument for MXN's attractiveness in an environment of contained realized volatility (7.91%). My market view: with the carry differential at these levels and no clear deterioration in global risk appetite, the medium-term bias continues to favor the peso against a dollar struggling to reclaim a hawkish narrative. Today's pressure reads more like month-start noise than a regime change.

Rates and Curve: The Long End Starts to Move

The UST 10Y rose 2.72bp to 4.49%, and that deserves attention. The U.S. curve maintains a positive slope (2s10s spread at +0.28pp), technically signaling normalization after a prolonged inversion. However, this steepening has a bear tilt: the long end is rising faster than the short end, potentially reflecting a term premium rebuilding amid fiscal concerns or uncertainty around the Fed's path. With the Fed at 3.63% and the 10Y at 4.49%, the market is demanding a considerable premium to lend long. If the 10Y breaks 4.50% convincingly, the DXY could see a more pronounced bounce and USD/MXN would feel it.

The Road Ahead: July 9 Is the Key Date

The highest-impact event on the immediate horizon is Mexico's CPI on July 9. Banxico is already at 6.50% following a sequence of cuts, and the market needs to know whether there's room to keep easing or whether inflation puts the brakes on that cycle. A hotter-than-expected CPI would be, paradoxically, constructive for the peso in the short term: it implies carry won't erode as quickly as the market had priced. A downside surprise opens the door to additional cuts and compresses the differential. The IPC Mexico at 66,967 (-1.00%) shows that local equities are navigating their own adjustment dynamic, partially decoupled from the peso.

In summary, the Risk On Score of 52/100 in CONSTRUCTIVE territory captures the reality well: there are no alarm bells, but also no clear catalysts for a strong EM risk-asset rally today. Carry remains the argument; noise in long-end rates is the risk to watch.

— See you tomorrow for Thursday's view.