A 162k payroll cools the Fed cut, and the peso digs in at 16.91

Happy Friday! Let's close out the week.

A blowout payroll rewrites the cut trade

The number everyone waited for landed hot at 8:30 ET: US nonfarm payrolls added 162,000 jobs in August against a consensus near +58,000, with unemployment steady at 4.1%. Worth a caveat: Tuesday's ADP print showed just +38k and the exact figure is worth reconfirming against BLS, but the direction is not in question.

Heading in, markets priced roughly 85% odds of a Fed cut in September. A payroll like this cools that bet fast, and the curve shows it: the 10Y climbs to 4.80%. With core PCE still at 2.8%, the Fed has more reason to wait.

The hit that never comes

Here's the twist. With US yields repricing higher, the playbook says an emerging-market currency should bleed. USD/MXN does the opposite: it opens at 16.9078, just 3 centavos off its 10-day floor at 16.8790.

The 20-day correlation between the currency and the 10Y sits at -0.16, decoupled this month, and today is the clean example. The 2.87-point rate gap over the Fed still pays, and Chicago specs were net long the peso by 82,382 contracts as of Aug 25, the heaviest pro-peso positioning in months.

The line that stings: the pair trades 3 ATR below its 20-day average, and 21 years of history say that stretch is no reason to expect more strength; the short side loses 47% of the time. My lean rests on today's resilience to the catalyst rather than the stat.

Where I stand

Yesterday I held neutral with a range, 16.88 below and 17.04 above, and said I'd flip dollar only on a close above 17.07 with the 10Y back over 4.80%. The yield hit 4.80% today; the pair skipped the ceiling and hugged the floor instead. That single leg triggers nothing, and the signal cuts the other way, so I lean peso.

With the currency absorbing a hot payroll without giving ground and pinned to its floor, the bias shifts to pro-peso. I drop it if the pair reclaims 17.04 with the 10Y holding above 4.80%; it confirms on a close below 16.88. Market read, not a trade ticket.

Bitcoin and the week ahead

Away from FX, the sharpest move of the morning is Bitcoin: +2.69% to 79,377, more than double its typical daily range, while MOVE eases to 74.68 and gold slips 1.24%. Risk appetite that pushes rather than flees.

Next week runs the show: Mexico CPI on the 9th, the ECB on the 10th and US CPI on the 11th. That last one, right after this payroll, decides whether the market buries the September cut.

Risk On rises from 57 to 62/100 and settles into CONSTRUCTIVE territory — VIX at 14.2 and Bitcoin's bid outweigh a compressed carry and rising long-end yields.

— Have a great weekend — see you Monday. ☕