Inflation eases to 3.12% and peso gains 14 centavos to 17.09, score 66

Happy Friday! Let's close out the week.

Inflation at 3.12%: the print the peso was waiting for

INEGI released July's annual inflation at 3.12% this morning, the lowest reading since December 2020 and squarely inside Banxico's target (3% ±1pp).

The driver was a bi-weekly -1.50% drop in fruits and vegetables that cushioned the rise in energy and utility tariffs.

The market digests it as a sign the central bank has room and credibility. Clean data, clean reaction.

The peso cracks its floor and the rate premium backs it

USD/MXN falls 14 centavos from the prior close, from 17.2320 to 17.09, trading 0 centavos from its 10-day support at 17.0890. The peso is in its strongest zone of the year.

Yesterday we flagged that floor at 5 centavos; today the pair reached it and is flirting with a break. The Banxico–Fed differential of 2.87pp still pays to stay long pesos.

Chicago speculators confirm it: net long 72,528 contracts as of Jul-28, adding on the week. Positioning is aligned with the narrative.

Long rates ease and gold sets a defensive tone

The U.S. 10Y trims 5bp to 4.62%, relieving the long-end pressure we'd been highlighting. The 2s10s curve stays positive at 0.45pp.

At the same time, gold rips +4.28% (z +2.8), a move nearly three times its typical day. That defensive bid coexists with S&P futures in the green: selective risk appetite, not euphoria.

The peso↔10Y decorrelation (+0.08 this month) says the peso is answering to its own local story today, not to the swings in U.S. rates.

View: the bias stays on the peso's side

With inflation inside target, carry at 2.87pp and the pair pinned to its floor, the bias favors the peso as long as the 10Y doesn't break 4.70% on a sustained basis. Above that level, or if the DXY reclaims 100.50 with force, I turn neutral.

This is a pro-peso stance aligned with the statistical base, which barely beats a coin flip: today's catalyst matters more here than five years of history.

The calendar shifts focus to U.S. CPI on Aug-12, the next judge for the dollar. Meanwhile, the 35% tariff on Canada in force since Aug-1 doesn't directly touch Mexico, but the USTR's next round is worth monitoring.

Risk On lands at 66/100, CONSTRUCTIVE: VIX at 15, peso realized vol at 6.30% and the pair in strong territory keep the mood supported. This is orderly appetite, not complacency.

— Have a great weekend — see you Monday. ☕

Correction (Aug 24, 2026): this view cited July annual inflation at 3.10%. The figure INEGI released that morning was 3.12% (core 3.95%); 3.10% was the first half of July. The number is corrected and the rest of the text stands as published.