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Peso (19.89 vs. dollar), oil and the EU-Iran nuclear deal

The peso starts the week with little change compared to Friday’s close, showing a moderate depreciation of 0.10% or 2 cents, trading around 19.89 pesos per dollar, with the exchange rate touching a minimum of 19.8388 and a maximum of 19.9364 pesos. .

In the foreign exchange market, a mixed performance is observed, while the dollar weighted index shows little change, strengthening only 0.03 percent.

Part of the calm in the markets is due to the fact that during the Asian session there was a low volume of operations, as the financial markets of China, Hong Kong and Australia remained closed.

Mexican peso

Likewise, on Wednesday the Federal Reserve’s monetary policy announcement will be published, where it will be relevant:

The content of the statement, as it is likely to mention that the discussion has started on the right time to cut the bond purchase program.

Jerome Powell’s press conference, which will provide his latest insight into upside risks to inflation and his expectations for monetary policy.

The publication of inflation projections, which will probably be revised upwards, as well as the Committee’s projection of interest rates, which could anticipate the first expected increase in interest rates from 2024 to 2023.

The peso-dollar exchange rate is likely to see upward pressure in anticipation of the Federal Reserve‘s monetary policy announcement, especially if the Treasury bond interest rate sees upward pressure.

Group of Seven

Regarding relevant news, the leaders of the seven most advanced economies (G-7) published a statement this Sunday in which they ask China to respect human rights, noting that the group will seek to counteract Chinese policies that weaken the development of the Global economy.

In addition, in the statement the leaders pledged to donate one billion doses of vaccines against Covid-19, during the next year. They also expressed their support for the minimum tax of 15% for multinational companies globally.

On the other hand, the prices of the main oil blends continue to rise as optimism around the nuclear agreement with Iran has been reduced, which will keep the global supply of that country reduced, while the optimism generated by the process of vaccination that drives demand expectations.

This led the WTI to touch a new annual high during the overnight of 71.70 dollars per barrel, not seen since October 17, 2018. The WTI starts the session trading at 71.46 dollars per barrel, with an increase in its price of 0.78 per barrel. hundred.

During the session, the exchange rate is expected to trade between 19.82 and 20.02 pesos per dollar.

The euro starts the session with an appreciation of 0.09%, trading at 1.2120 dollars per euro, while the pound gains 0.05%, reaching 1.4114 dollars per pound.

Money market and debt

In the United States, the yield on the 10-year Treasury bonds shows an increase of 1.0 basis point, reaching 1.46%, while in Mexico the yield on the 10-year M bonds remains unchanged, at a rate of 6.67 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 1.70% 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 19.9561 at 1 month, 20.3134 at 6 months and 20.7955 pesos per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE

 

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