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The Mexican peso advances against the dollar to 19.87 units

The peso starts the session with an appreciation of 0.14% or 2.8 cents, trading around 19.87 pesos per dollar, with the exchange rate touching a minimum of 19.8383 and a maximum of 19.9227 pesos.

The performance of global financial markets is mixed and without a clear direction, due to the publication of little relevant economic information at a global level.

In the foreign exchange market, the dollar weighted index shows an advance of 0.03% and inside, few currencies register a significant advance against the dollar, with the Mexican peso ranking as the tenth currency with the greatest appreciation.

The most appreciated currencies this morning are the New Zealand dollar with 1.07%, the South Korean won with 0.46% and the Chinese yuan with 0.31 percent.

It is important to mention that, with this appreciation, the Chinese yuan touched a price of 6.3879 yuan per dollar, being its best level since June 14, 2018.

The advance of the Chinese yuan is explained by the weakness of the dollar that since the end of April has lost 3.16% according to the weighted index, in view of the expectation that the Fed will maintain a broadly flexible monetary stance.

It is worth mentioning that the advance of the Chinese yuan is also favoring other currencies of nearby economies, such as the New Zealand dollar and the South Korean won.

The mexican peso

In capital markets, the main Asian indices closed with moderate gains close to 0.50% and in Europe the indices lost on average around 0.30 percent.

The futures market indicates that the US capital market could start with gains, although close to 0.20 percent.

This morning the revised data for economic growth in Mexico during the first quarter was published.

The data showed an upward revision to quarterly growth from 0.44% to 0.76% according to seasonally adjusted figures.

Consequently, at the annual rate, a contraction of 2.77% is observed, from a contraction of 2.93% in the timely estimate.

Due to a review of the entire series, seven quarters of consecutive annual contractions accumulate until the first quarter, that is, since the third quarter of 2019, being the longest period of annual contractions on record since 1981.

Economy of mexico

Within GDP, the three large groups of economic activity showed an upward revision with respect to the timely estimate.

Primary activities grew at a quarterly rate of 0.66% (revised from -1.27%), while secondary activities grew 0.46% quarterly (revised from 0.72%), highlighting in the interior a quarterly growth of mining of 1.89% and growth of construction of 2.66%, both sectors explaining the growth of secondary activities in the first quarter.

It should be noted that manufacturing contracted at a quarterly rate of 0.19%. Finally, tertiary activities grew at a quarterly rate of 0.88% (revised from +0.72 percent).

In the interior, the two sectors that contributed the most to this growth were retail trade, which grew 3.80% quarterly, and transport, postal and storage services, which grew 2.33% quarterly, a sector that is closely related to commerce and godos distribution activities.

Services and peso

It stands out that the sectors showing the strongest annual falls are not recovering faster than the sectors that have already recovered.

The services of restaurants, bars and hotels show an annual contraction of 33.3% and in the first quarter they grew only 0.3%; and the same happens with recreational services and corporate services.

This is mainly attributed to a high degree of caution on the part of consumers who have not yet regained the confidence to leave their homes given the slow progress of vaccination, as well as changes in consumption habits in the face of the new normal.

With today’s publication, the probability that GDP shows an annual growth of close to 5.0% during 2021 is increased, this being mainly the result of a rebound effect that will be observed during the second quarter, when an annual growth of the GDP greater than 17 percent.

IGAE

For its part, this morning the Global Indicator of Economic Activity (IGAE) was published, which showed a real growth of 2.62% during March, after having decreased 0.62% in February, according to seasonally adjusted figures.

In the interior, primary activities grew 1.37%, secondary 0.72% and tertiary 3.09 percent.

The increase in the service sector was the largest since July 2020, driven by the relaxation of measures restricting the operation and capacity of businesses, given the better epidemiological conditions.

Of note was the 8.38% monthly growth in temporary accommodation and food preparation services, as well as the 4.42% advance in transportation and mass media information.

Compared to March of last year, the IGAE showed an annual advance of 0.41%, being the first annual increase after 22 consecutive months of falls, recalling that in March 2020 it was when the negative effects of the pandemic began to be observed.

However, when making the comparison with respect to the pre-pandemic level (February 2020) the IGAE still shows a contraction of 1.26%.

By sector, only secondary activities show an annual increase, advancing 1.46%, supported by manufacturing industries (5.51% annually).

Primary activities showed an annual contraction of 0.58%, since with the onset of the pandemic this sector benefited.

Finally, the tertiary sector showed an annual decline of 0.18 percent.

Perspective

For April, the IGAE is expected to show significant annual increases since in April 2020 the indicator contracted at an annual rate of 19.83%. However, recovery will need to be measured against the February 2020 pre-pandemic level.

During the session, the exchange rate is expected to trade between 19.79 and 19.98 pesos per dollar.

The euro starts the session with a 0.18% depreciation, trading at $ 1.2228 per euro, while the pound remains unchanged at $ 1.4153 per pound.

Money market and debt

In the United States, the yield on the 10-year Treasury bonds remains unchanged at 1.56%, while in Mexico the yield on the 10-year M bonds increases 1.0 basis point, reaching a rate of 6.72 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 1.73% 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 19.9268 at 1 month, 20.2888 at 6 months and 20.7721 pesos per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE

 

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