BoJ holds at 1.0% with a hawkish tilt: peso 5 centavos from the 17.31 floor

Happy Friday! Let's close out the week.

Ueda holds at 1.0% and sounds less dovish

The Bank of Japan left its benchmark at 1.0%, a high since 1995, on an 8-1 vote —Takata dissented, calling for a hike to 1.25%. It trimmed its FY2026 core inflation forecast to 2.5% from 2.8%, but warned underlying prices will "clearly" top 2% in the second fiscal half.

The read is a moderately hawkish Ueda. The yen doesn't unwind as a funding currency, and that keeps the global carry trade well oiled —currently working in favor of emerging markets.

The peso circles its floor with the rate gap on its side

USD/MXN opens at 17.3564 (+0.10%), sitting just 5 centavos from the 10-day support at 17.31. We've had several sessions with the currency pinned to the strong side of the range.

The rate premium underpins the case: Banxico at 6.50% versus a Fed at 3.63% leaves a 2.87pp differential, and with emerging-market FX vol at a year low, Latin America offers the best carry-to-risk in the block. Chicago speculators remain net long the peso by 71,699 contracts.

Firm yields, no drama in the curve

The 10Y climbs 3bp to 4.69% and MOVE adds 2.72 points to 77.09 —the most unusual move on the rates board today, though nothing alarming yet. The 2s10s stays positive at 0.45pp: zero stress signal in the curve.

US PCE printed 2.6% headline and 2.9% core, well within digestible range; the market has already moved past it and didn't reprice immediate cut bets. That's the only nod to Fed rates today.

Next week deals the cards

Looking ahead, the calendar matters more than today's noise: Banxico on Aug 6, plus Mexico CPI and US payrolls on Aug 7. That's where the currency's next leg gets fought.

VIEW: as long as 17.31 holds as a floor and the 10Y doesn't spike above 4.75%, the bias favors staying long peso / carry. A sustained close below support or a yield jump beyond that threshold turns me neutral. This is a market opinion, aligned with a mildly pro-peso historical base —which, with this prior, barely beats a coin flip, so the catalyst weighs more than the statistics.

The Risk On score lands at 51/100, CONSTRUCTIVE, easing from yesterday's 56: MOVE and yields subtract, but the VIX at 17.23, the S&P +1.66% and a firm peso hold the tone. Crude ticking up (WTI +1.88%) barely tints the backdrop, without moving the risk-appetite needle.

— Have a great weekend — see you Monday. ☕