Virtual meeting today of the trade representatives of Mexico, the United States, and Canada for the first joint USMCA review.
This is the moment at which the three countries must confirm in writing whether they wish to extend the treaty's validity for another 16 years.
Key points
Fed Chair Kevin Warsh participates in a central bankers' forum organized by the ECB in Sintra, Portugal.
US companies generated 98,000 jobs in June.
Eurozone inflation fell in June more than expected.
The US and Iran are still far from reaching a framework that allows the complete reopening of the Strait of Hormuz.
The US manufacturing ISM would have decelerated in June after recording sharp gains in prior months.
For the rest of the day, the interbank exchange rate (pesos per dollar) could trade between $17.48 and $17.58 spot.
US futures are retreating slightly, with the market pointing to a cautious July open ahead of Warsh's imminent appearance in Sintra and after June's ADP recorded 98,000 private sector jobs, below consensus. The 10-year Treasury yield rises to 4.47%. WTI sheds to US$69 and Brent retreats to US$72, with the US-Iran technical talks in Doha generating mixed signals. The yen trades at 162.69 per dollar, near 40-year lows, without Japanese intervention for the moment. The day's events are Warsh's speech in Sintra. On the corporate front, Nike reported results above consensus, though projections fell below expectations.
Monitor
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What you need to know about the economy and markets
Today, the trade representatives of Mexico, the US, and Canada meet virtually for the first joint USMCA review. This is the moment at which the three countries must confirm in writing whether they wish to extend the treaty's validity for another 16 years. While Mexico and Canada have already formalized renewal requests, Trump's stance remains deliberately ambiguous, with a high probability that he will formally opt not to extend the validity period. In any case, no resolution is expected at this virtual meeting; the immediate objective is a joint statement of intent, followed by additional bilateral negotiations, including a third round between Mexico and the US scheduled for late July.
Our Take
The lack of agreement on modifications does not imply the treaty's disappearance. What would happen is that the USMCA would enter a scheme of annual reviews over the next decade, until its formal expiration on July 1, 2036. We consider these types of US announcements to be part of a negotiating leverage strategy rather than a real intention to end the trilateral treaty.CC
All eyes will be on Fed Chair Kevin Warsh when he appears at a central bankers' forum organized by the European Central Bank in Sintra, Portugal this Wednesday (7am), looking for some guidance on the future steps of the US central bank. The key for markets will be whether Warsh continues to sound "hawkish" as at the June 17 Fed meeting, or whether by contrast the recent decline in oil prices allows him to shift toward a more neutral tone.
Our Take
We expect Fed Chair Kevin Warsh to maintain the ambiguity that has characterized his management since his Fed debut, avoiding a clear classification as hawk or dove. The central message will likely emphasize the price stability mandate above full employment. As such, we do not anticipate explicit guidance on the monetary policy trajectory.
US ADP private sector employment increased by 98,000 positions in June, below the 122,000 recorded in May and the 113,000 expected by consensus. The largest job creation was concentrated in education and health services (+48,000). Additionally, annual wage growth held at 4.4% for those who remained in their jobs and increased to 6.6% for those who changed jobs.
Our Take
Despite the moderation in the pace of employment, the figures support the view that the labor market has strengthened after several months of irregular hiring, as job openings have increased and layoffs remain at low levels. Looking ahead, a key question is whether the labor market will be boosted by the fall in energy prices and the improvement in consumer confidence following the provisional agreement reached between the US and Iran to end the war.
In June, Eurozone inflation offered some relief with the annual rate standing at 2.8%, down from 3.2% in May and below expectations, according to the preliminary estimate published by Eurostat. All components contributed to this, especially energy. The core inflation rate eased two tenths to 2.4%.
Our Take
It appears that the worst-case scenarios on inflation have become less probable. However, given the uncertainty that still surrounds the Middle East agreement, the European Central Bank will maintain a focus on observing how events develop and determining whether more decisive action on interest rates is still necessary.
The US and Iran are still far from reaching a framework that allows the complete reopening of the Strait of Hormuz. In this regard, Tehran speaks of "serious challenges" in implementing certain aspects of the Memorandum of Understanding signed one week ago and demands that Washington fulfill its commitments (frozen assets). This comes after the Persian country assured that it will not meet with the main US envoys who flew to Doha, Qatar.
Our Take
In what appears to be a new twist in the peace talks between the United States and Iran, the latter insists it will not begin negotiations on its nuclear program, as it believes some relevant pending matters from the memorandum of understanding must first be resolved, in light of what happened last weekend.
Later, at 8:00am, the US manufacturing ISM for June will be published. Market consensus anticipates the index will stand at 53.7 points, slightly below the 54.0 points recorded in May. If confirmed, the indicator would remain above the 50-point threshold, continuing to signal manufacturing activity expansion, though at a slightly slower pace.
Our Take
The market expects a marginal moderation in US manufacturing activity after the solid expansion observed in May. Nevertheless, a level of 53.7 points would continue to be consistent with a resilient manufacturing sector, supported by the strength of domestic demand.
Corporate News
The US Department of Commerce lifted the export restrictions it had imposed last month on Anthropic's artificial intelligence models, including Fable 5 and Mythos, which had forced the company to cut access to users outside the US for national security reasons.
Meta is developing plans to create Meta Compute, a business unit that would sell access to AI computing power and its models to external clients, directly competing with Amazon Web Services, Microsoft Azure, and Google Cloud, according to Bloomberg reports. The initiative includes two business models: one where clients pay for access to AI models, and another selling computing capacity similar to CoreWeave.
Our Take
If the company manages to monetize its data infrastructure, in which it has committed hundreds of billions of dollars, it would resolve in one stroke the most consistent investor criticism of its business model: that AI capex is spending without visible return. Mark Zuckerberg had already indicated in May that he was "open" to selling excess computing capacity, and confirmation that this strategy is in development changes the narrative around Meta.
Nike reported yesterday a 4% year-on-year decline in its fiscal fourth quarter, though marginally above consensus, with China sales falling 12% year-on-year and outgoing CFO Matthew Friend declaring that the company does not expect the environment to improve significantly over the next six months. Shares fall 4.3% in pre-market trading. Nike projects a low-to-mid single-digit revenue decline for the first half of fiscal year 2027.
The to-do list
Follow the USMCA virtual meeting: Mexico and Canada have already formalized their renewal requests, but Trump's ambiguous stance makes it likely he will opt not to extend, which would activate a scheme of annual reviews through 2036, and any joint statement will set the tone for the peso during the day.
Watch Kevin Warsh in Sintra at 7:00am: markets will look for signals on whether he maintains the hawkish tone of the June 17 meeting or whether the fall in oil prices opens space for a more neutral shift, which would move the bets on a September hike.
It's Wednesday, the inflection point of the week: review what was left pending from Monday and Tuesday, and define what must be resolved before Friday.
Tonight, prepare a corn cream soup with rajas and epazote, one of the most comforting dishes of the season and one that takes no more than 30 minutes.
Dedicate 30 minutes to a circuit of burpees and squats, no equipment, no excuses, and in any space at home.
Today's quote…
"Courage is not the absence of fear, but the decision that something else is more important than fear."
— Ambrose Redmoon
Alejandra Marcos amarcos@kapital.com
James Salazar jsalazars@kapital.com
Guillermo Quechol gquechol@kapital.com
Nahely Suasnavar nsuasnavara@kapital.com
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