Banxico sets rates this afternoon, peso a centavo from 17.60

Good morning!

It all hangs on an afternoon call

The peso reaches Banxico day already bruised on its own account: the dollar rises 6 centavos, from 17.5250 to 17.5897, leaving the pair a single centavo below its 10-day rolling ceiling at 17.6040.

Yesterday I flagged Banxico as the day's judge. It's still ahead of us: the decision lands at 13:00 CDMX, and at this hour I don't have the result. I won't manufacture one.

What I can read is the ground that ruling drops onto, and it doesn't favor the currency.

The Treasury market is doing the pushing

The 20-day correlation between the peso and the US 10-year sits at +0.63: when the US yield climbs, the Mexican unit weakens. Overnight that yield pushed to 5.12%, above the 5% handle we've flirted with all week.

The finer overnight move wasn't spot, though — it was rate vol. The MOVE index jumped more than 14 points to 95.45, four times its typical day.

That leap surprised me more than the dollar itself. A spike like that in the Treasury fear gauge tends to precede jumpy sessions and explains why global appetite woke up softer.

A defensive tape

Risk On drops from 46 to 41 and slides into DEFENSIVE territory. With the VIX at 16.06 this is guard-up, not panic; the equity block weighs, the S&P shedding 0.76% after yesterday's record.

The Banxico–Fed carry, compressed to 2.62pp, no longer offsets this mix of rate vol and tired equities the way it once did.

Still long the dollar, with Banxico as the wildcard

My read doesn't change from yesterday: I hold the dollar bias while the currency fails to claw back ground. The pro-dollar call I opened on September 17 matured today and was validated — USD/MXN rose 2.03% over five business days.

The asterisk has a name. A hawkish surprise this afternoon is the only thing I see capable of braking the advance before the ceiling. And the uncomfortable part: spot trades 6.8 ATR above its 20-day mean, an extreme stretch. It doesn't guarantee a reversal, but it's no invitation to chase up here either.

I drop the dollar bias if USD/MXN closes below 17.29.

— See you tomorrow for Friday's view.