Peso under mild pressure as dollar firms, but carry holds — Mexico CPI in focus today

Good morning!

The signal of the day: a firmer dollar, but no panic

The DXY hovering near 101 and the US 10Y rising 9bps to 4.57% set the macro tone at the open. But this is not a classic risk-off move: the VIX sits at 16.66, S&P futures are recovering (+0.29% premarket after yesterday's -0.28% spot decline), and gold is surging 1.35% to $4,126. That last point is the day's ambiguous signal — gold is rallying not because risk appetite is collapsing, but rather as a store-of-value bid amid long-term monetary policy uncertainty and US curve steepening. Bitcoin at 62,585 (+0.53%) confirms that pure risk-off is not the dominant scenario.

The peso and carry: holding firm, but watching 17.64

USD/MXN at 17.56 is up just 0.23% — a move that, given the broader dollar strength context, speaks to the peso's resilience. The 2.87pp carry differential (Banxico 6.50% vs Fed 3.63%) remains the anchor. Realized vol at 7.81% keeps the vol-adjusted carry attractive, and the MOVE at 72.41 signals no severe stress in US rates that could blow up the trade. The key level to watch is the 17.6406 resistance — if today's Mexican CPI surprises to the downside (faster-than-expected disinflation), the market may price in an earlier Banxico cut cycle and test that level. In the opposite scenario — sticky inflation — the 17.3631 support becomes the medium-term target. My market view: with carry still generous and realized vol contained, the market bias continues to favor the peso at the margin, though today's CPI print is a real intraday catalyst.

Rates and the curve: US steepening as a risk variable

The UST curve displays a bear steepener profile: 2Y at 4.19%, 10Y at 4.57%, 30Y at 5.05%. The 2s10s spread at +36bps is positive and widening, signaling a repricing of term premium and/or longer-term inflation expectations — not necessarily a more hawkish near-term Fed. For the peso, this steepening cuts both ways: on one hand, if the US long end rises sharply, MXN's relative carry compresses; on the other, a positively sloped US curve is typically consistent with growth environments that support risk-on and EM assets. The TIIE28 at 6.76% with Banxico at 6.50% leaves little room for an imminent cut — the local rates market is aligned with that message.

The road ahead: two dates in command

Two dates dominate the calendar: Mexico CPI today (INEGI) and US CPI on July 14. The combination of both will set the tone for the second half of July for the pair. If Mexico shows moderate inflation and the US next week also surprises to the downside, a global dovish scenario would be constructive for EM carry — but paradoxically could weaken the peso if the market prices in more aggressive Banxico cuts. The real sweet spot for the peso would be: Mexican inflation still above target (giving Banxico reason to move slowly) + benign US CPI (removing pressure from the dollar). That scenario would keep carry intact and USD/MXN anchored in the current range. Today's Risk On Score is 59/100 — CONSTRUCTIVE: a low VIX, robust carry, and contained volatility dominate the weighted breakdown. This is not euphoria, but there are no signals of systemic deterioration either. The context favors operational calm, with today's CPI print as the only real wildcard on the session.

— See you tomorrow for Friday's view.