Inflation in the US, peso (19.71 vs. dollar) and tourism in Mexico

In the United States, inflation was published for the month of May, which was at an annual rate of 5.0%, above the market’s expectation of 4.7%.

Thus, annual inflation was at its highest level since August 2008.

In its monthly comparison, inflation was 0.6%, after having increased 0.8% in April.

For its part, core inflation, which serves as a better indicator of the long-term trend of inflation, stood at an annual rate of 3.8%, its highest level since June 1992.

In its monthly comparison, the underlying component advanced 0.7 percent.

In the interior, the greatest increase was observed in the prices of used cars, showing a monthly inflation of 7.3 percent.

After the publication of inflation, the peso is operating with an appreciation of 0.17%, trading around 19.71 pesos per dollar, with the exchange rate trading between a minimum of 19.6587 and a maximum of 19.7594 pesos.

In the foreign exchange market, the US dollar also remains stable, showing a decline of 0.05% according to the weighted index, which is due to the fact that the market is still defining a direction for the publication of the data.

It should be added that, in Europe, the European Central Bank (ECB), in its last monetary policy announcement released at 7:30 am, maintained its commitment to maintain a flexible monetary stance through the purchase of bonds.

Mexican peso

In the foreign exchange market, the Turkish lira ranks as the most appreciated currency, showing an advance of 0.76%, while the South African rand appreciated 0.55%, the Taiwanese dollar 0.29%, the Russian ruble 0.16% and the Australian dollar 0.13%. hundred.

The raw materials market is calm, although energy prices continue to rise, with WTI oil advancing 0.11%, while the price of natural gas rises 0.16 percent.

Inflation and daboral sector

On the other hand, the weekly employment report in the United States showed that initial applications for unemployment support continued to decline for the sixth consecutive week, decreasing by 9 thousand compared to the previous week and reaching 376 thousand units.

On the other hand, continuous applications for unemployment support decreased from 3.76 to 3.50 million people.

It should be remembered that, as of June 12, four states will stop providing the additional unemployment benefits included in the latest stimulus package. In the rest of the month, more than 20 states will also eliminate this federal support, with the intention of motivating the job search.

Tourism

Regarding economic indicators in Mexico, INEGI published the figures from the International Travelers Survey (EVI) corresponding to the month of April 2021.

The survey shows that 4 million 185 thousand visitors entered the country during April, 0.6% less than last month, but 87.8% higher than the visitors who entered Mexico in April of last year.

This is the first positive annual rate in 12 months, but it is due to the fact that the April 2020 figure was very low, and compared to April 2019 it shows a contraction of 48.2 percent.

Of the total number of visitors, 2 million 325 thousand were international tourists, 1.83% more than the tourists who entered last month, and in the same way, with respect to the same month of 2019, it shows a significant contraction of 35.8 percent.

Total visitor spending during April was 1,277.7 million dollars, and although it shows a growth of 873.3% compared to April 2020, when compared to April 2019 it shows a deterioration of 39.1 percent.

On the other hand, the average spending per visitor does show a growth compared to April 2019 of 17.5%, standing at 305.3 dollars per visitor.

Vaccines against Covid-19 and inflation

Regarding expenses, during April 2 million 586 thousand international visitors and 916 thousand tourists left Mexico, representing contractions with respect to the same month of 2019 of 63.6% and 47.8%, respectively.

The more severe drops in expenditures compared to April 2019 is evidence of a greater lag in the economic recovery in Mexico compared to the rest of the world.

It is expected that the pace of recovery of the Mexican tourism sector will accelerate before the beginning of the summer vacation period and the advance in vaccination campaigns both in Mexico and in the world, which would have a significant economic spill in tourist entities that are still far from a full recovery.

During the session, the exchange rate is expected to trade between 19.59 and 19.76 pesos per dollar.

The euro starts the session with an appreciation of 0.02%, trading at 1.2183 dollars per euro, while the pound advances 0.13%, reaching 1.4137 dollars per pound.

Money market and debt

In the United States, the yield on the 10-year Treasury bonds shows an increase of 2.9 basis points, reaching 1.52%, while in Mexico the yield on the 10-year M bonds increases by 1.5 basis points, at a rate of 6.62 percent.

Derivatives market and the peso

To hedge against a depreciation of the peso beyond 20.00 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 1.39% and represents the right but not the obligation to buy dollars in the aforementioned level.

On the other hand, the interbank forward for sale is at 19.8056 at 1 month, 20.1574 at 6 months and 20.6367 pesos per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE