The peso starts the session with an appreciation of 0.23% or 4.6 cents, trading around 20.18 units of peso per dollar, with the exchange rate touching a minimum of 20.1456 and a maximum of 20.2569 pesos.
In the exchange market, most currencies are gaining ground, with the Chilean peso standing out with 0.75%, the South African rand with 0.74%, the British pound with 0.60% and the Norwegian krone with 0.47%, most of which are currencies from producing countries. raw material.
In the commodities market, increases in energy prices continue to be observed, with the WTI rising 0.67% to 61.55 dollars per barrel, reaching a maximum not seen since January 8, 2020, of 62.26 dollars.
For its part, gasoline increased 0.59% and natural gas 1.12%, as a result of the energy crisis in the state of Texas that has forced the suspension of 40% of oil production nationwide.
It should be noted that energy commodities are not the only raw materials whose prices have been pushed up. Industrial metals also started the session with gains, with an increase in demand from China, a country that returns from vacation after the Lunar New Year celebrations.
Given this, the price of copper reached a maximum not seen since February 28, 2012 of $ 8,652 per metric ton, while the price of aluminum reached a maximum not seen since October 5, 2018, of $ 2,167 per ton metrics.
Nickel reached a high not seen since Sept. 8, 2014, of $ 19,050 per metric ton.
This morning the dollar weighted index shows a decline of 0.24%, after having advanced 0.64% in the two previous sessions.
It is important to note that, although some currencies could gain in the short term due to increases in the prices of raw materials, the effect of the shock to the energy market on the real economy is negative, with direct repercussions on the economy of the southern United States and mainly Mexico.
Yesterday afternoon, the governor of Texas, Greg Abbott, informed that he will prohibit the export of natural gas until February 21, to ensure the supply of energy in his territory, since millions of users continue without service.
Although the restoration of electric power supply has been announced at the national level, the government has asked companies to reduce their consumption of natural gas due to the shortage in Mexico.
In line with the petition, General Motors announced the suspension of activities at the Guanajuato plant. Likewise, Volkswagen, Audi and Mazda reported that they will stop the production of some models at their plants in Mexico.
The automotive companies indicated that they will resume their activities when the gas supply is optimal, which could happen by the weekend.
On the other hand, some supermarkets will reduce the production of bread and tortillas, in order to reduce their gas consumption.
In Mexico, during the first three quarters of 2020, manufacturing represented 15.28% of GDP.
In daily information it represents 0.042% of total GDP. This implies that the total manufacturing halt of three days is equivalent to 0.13 percentage points of GDP directly.
That is, if a growth of 3.80% was estimated, it would now be 3.67 percent.
Although this seems insignificant, the indirect effect of plant closures on other sectors, such as services, must also be subtracted. Therefore, it is probable that in the short term growth forecasts for this year will begin to be revised downwards.
Pemex and the peso
On the other hand, yesterday afternoon the Secretary of the Treasury, Arturo Herrera, said that the government will announce a program to reduce Pemex’s tax burden.
The objective of the program is to support the oil company to reorganize its finances, given the crisis it faces due to the drop in its production and the increase in its debt.
The announcement is not surprising, since the federal government has previously carried out similar actions to support the oil company. However, the help of the Federal Government does not solve the root problem of Pemex, which is the oil company with the most debt globally, since it does not change its business model.
The aid represents greater pressure on Mexico’s public finances and could also represent a risk of downgrading the credit rating of sovereign debt in the future.
Regarding economic indicators, in the United States in the week ended February 13, 861 thousand new applications for unemployment support were reported, increasing by 13 thousand compared to the previous week, while the market expected a reduction of 23 one thousand.
Continuous applications for unemployment support, from those who are already receiving support or continue to wait, decreased from 4,558 to 4,494 million.
For its part, in Mexico the Monthly Survey of the Manufacturing Industry was published as of December.
During the month, the value of real production in the manufacturing industry recovered strength by growing at an annual rate of 7.69%, the fourth consecutive increase and the highest since May 2017, according to original figures.
It should be remembered that, during the confinement in May, the value of the real production of the manufacturing company registered an annual contraction of 47.14 percent.
With this, the value of real production showed an average annual contraction of 9.50% in 2020, the largest drop on record (2013).
In the interior, the sectors that show the highest real annual increases in December are: the manufacture of accessories and electrical appliances (23.65%) and the basic metal industries (17.88 percent).
It should be remembered that the manufacture of electrical accessories and appliances has been driven by external demand, as it is the third subsector with the highest exports from Mexico to the United States.
In contrast, the categories most lagging behind in the value of production are the manufacture of clothing with a real annual fall of 23.18%, given that it is a category that is not considered essential, while the manufacture of petroleum products showed an annual contraction of 17.58%, affected by the slow recovery of mobility levels.
For its part, the plant capacity used increased from 76.8% in November to 78.6% in December, even exceeding the 75.7% observed in December of last year.
The December figure is surprising, as six states in the country strengthened sanitary measures, in addition to the fact that during that month the plant capacity used tends to decrease due to the reduction of working days.
In the breakdown by state, 24 of the 32 states presented real annual growth in December, with 13 of them in double digits.
The states with the highest growth in the real value of production were Nayarit (47.0%), Campeche (37.9%), Aguascalientes (30.7%), San Luis Potosí (29.3%) and Quintana Roo (26.1%), although Quintana Roo, Nayarit and Campeche as a whole represent less than 0.25% of total manufactures in Mexico.
Likewise, the 3 states with the highest participation in the national manufacturing industry, Nuevo León, Estado de México and Coahuila, grew at annual rates of 9.9%, 5.0% and 12.1% respectively.
On the other hand, the 8 states that presented real annual contractions during December 2020 were Tamaulipas (-9.8%), Tabasco (-4.5%), Mexico City (-4.2%), Oaxaca (-4.0%), Veracruz (-3.2 %), Hidalgo (-1.2%), Chiapas (-0.9%) and Baja California Sur (-0.3 percent).
By 2021, the highest growth is expected to be observed in the states with the highest participation in the export manufacturing industry due to the growth momentum of the United States.
However, a slowdown in production is likely in January due to a shortage of semiconductors in the automotive industry that caused the temporary closure of some plants.
Likewise, production in February was also affected by frosts that caused interruptions in the supply of energy inputs in the north of the country, which forced the closure of plants in the manufacturing sector, particularly in the automotive sector.
By 2021, within manufacturing, divergent trends could be seen between sectors, as sectors sensitive to external demand are expected to continue showing favorable dynamics.
The foregoing, consistent with the positive signs that have been observed in the United States, highlighting:
1) The 1.0% monthly increase in manufacturing production in January, resisting the adverse epidemiological conditions.
2) The rapid implementation of the vaccination plan, since 16.68 doses have been applied per 100 people, which has allowed greater economic openness.
3) The high probability of approval of the fiscal package proposed by the president, Joe Biden, with a value of 1.9 trillion dollars, which would accelerate the recovery of the US economy.
Meanwhile in Mexico, the IMEF manufacturing indicates that the strength of the manufacturing sector continued during January, since the indicator advanced 1.4 points compared to December, reaching 50.2 points, above the expansion threshold of 50 points.
During the session, the exchange rate is expected to trade between 20.11 and 20.35 units of weight per dollar.
The euro starts the session with an appreciation of 0.41%, trading at 1.2087 dollars per euro, while the pound advances 0.89% and is trading at 1.3980 dollars per pound.
Money market and debt
In the United States, the yield on the 10-year Treasury bonds increased by 2.7 basis points, to 1.30%, while in Mexico the yield on the 10-year M bonds remained unchanged, at a rate of 5.81%.
Derivatives Market and the peso
To hedge against a peso depreciation beyond 20.50 peso units per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 1.55% and represents the right but not the obligation to buy dollars at the aforementioned level.
On the other hand, the interbank forward for sale is at 20.2305 at 1 month, 20.5600 at 6 months and 20.9581 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.