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The peso (19.70 vs dollar ) and construction and manufacturing in Mexico

The peso starts the session with few changes compared to Thursday’s closing, showing a depreciation of 0.02%, trading around 19.70 pesos per dollar, with the exchange rate touching a minimum of 19.6433 and a maximum of 19.7284 pesos.

In the foreign exchange market, the performance against the dollar of the main currencies is mixed, while the weighted index of the dollar shows a moderate advance of 0.2 percent.

Little relevant economic information is published this morning, which contributes to the calm in financial markets.

Likewise, for the second day in a row there is still speculation that the Federal Reserve will not modify its broadly flexible monetary stance, despite the fact that inflation in May reached an annual level of 5.0%.

In the futures market, the main indices of the United States capital market continue to advance, while in the bond market the rate of return on 10-year Treasury bonds rises 1.5 basis points to 1.45%, in a moderate adjustment to the up after falling 14 basis points in the three previous sessions.

Finally, in the commodity market, commodity prices advance, mainly energy and industrial metals, with WTI oil rising 0.21% to 70.44 dollars per barrel, while copper advances 1.71%, nickel 0.18% and steel 2.24 percent.

The mexican peso

Regarding relevant events, the group of the seven most advanced economies (G-7) began its meeting in the United Kingdom today.

The meeting is expected to discuss issues related to post-pandemic recovery and the distribution of vaccines to developing countries, as well as discussions around climate change.

Finally, in Mexico the industrial activity indicator for April was released, which showed a monthly contraction of 0.23% according to seasonally adjusted figures, being the first monthly contraction since May 2020, before the recovery process began. .

The moderate contraction was due to monthly falls in three of its four components: utilities (generation, transmission and distribution of electric energy, supply of water and gas through pipelines to the final consumer) contracted 1.04%, construction in 0.30% and manufacturing 0.49%.

The contraction in April does not imply a deterioration in growth expectations, as it was already estimated.

Within manufacturing, the monthly contraction was due to continuing problems with automotive production due to a shortage of semiconductors.

Mexican industry

At an annual rate, according to seasonally adjusted figures, industrial activity grew 35.75%, due to a low base of comparison effect, since in April of last year industrial activity contracted 25% monthly and 30% annually.

Inside, the rebound effect is very significant in the construction sector with 44.65% annual growth and manufacturing with 50.18% annually.

The manufacture of transportation equipment registered an annual growth of 562.35%, after that between February and April 2020 the production of the subsector fell 87 percent.

In May, the data is expected to show growth in industrial activity, offsetting the moderate contraction in April.

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 a depreciation of 0.35%, trading at 1.2128 dollars per euro, while the pound loses 0.21%, settling at 1.4147 dollars per pound.

Money market and debt

In the United States, the yield on the 10-year Treasury bonds shows an increase of 2.0 basis points, reaching 1.45%, while in Mexico the yield on the 10-year M bonds remains unchanged, at a rate of 6.61 percent.

Derivatives market and the Mexican 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 1.30% 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 19.7742 at 1 month, 20.1251 at 6 months and 20.6079 pesos per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE

 

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