Oil surges 4.6%, hawkish Fed minutes pin the peso at 18.02

Good morning!

The standout move into the open is energy: WTI +4.61% to 92.35, its biggest jump in weeks and back on a path toward $100. Gold is barely up (+0.17%) and bitcoin is off 1.33%, so this is oil running on its own, with no broad haven bid behind it.

Why crude matters to the peso today

A spike in oil revives the inflation story at the exact moment the Fed told us it isn't done. Minutes from the September 15-16 meeting landed yesterday and read clearly hawkish: most participants see another hike before year-end appropriate, and several said the policy rate is "not restrictive or only slightly so."

Context for the desk: in September the Fed hiked 25bp to 3.75%-4%, its first increase since 2023, with 16 of 18 members penciling in at least one more move in 2026. A pricier barrel hands that camp more ammunition.

Rates do the work, the peso feels it

The 10-year Treasury climbs to 5.33% (+5bp), grinding the rate gap against the peso: the Banxico–Fed premium narrows to 2.62pp as Washington lifts and Banxico sits at 6.50%. That compression, more than crude, is the real headwind for MXN.

Honest caveat: the 20-day correlation between the peso and that 10-year is just +0.16 this month (they've decoupled), so hanging the whole case on yields leans on a link that's weak right now. I flag it because my bias rests there.

Where I stand

Yesterday I sat neutral with two lines: dollar on a close above 18.30, peso on a return below 18.00. Neither fired (spot sits at 18.02) and I still lean dollar: hawkish minutes plus rising crude changed the day's math.

I do it with the scorecard open: my Oct 1 pro-dollar call was wrong, USD/MXN moved -0.34% over five sessions and the peso beat me. I come back to this side with less swagger.

Risk On prints 42/100 (DEFENSIVE), and it's worth seeing where the defense lives: not in the VIX, calm at 15.76, but in bonds, where MOVE sits at 102.56, and in the peso, one of the weakest sub-indices. Tension in rates, calm in stocks.

If you're running short-dollar hedges, 18.00 is your line today. I drop the bias on a close back below it; Mexico's CPI tomorrow takes the gavel.

— See you tomorrow for Friday's view.