The peso closed the week with an appreciation of 0.67% or 13.7 cents, trading around 20.17 pesos per dollar, with the exchange rate hitting a maximum of 20.3805 and a minimum of 20.0651, a level not seen since February 16.
The appreciation of the Mexican peso occurred alongside a weakening of the US dollar that lost 0.52% during the week according to the weighted index.
Likewise, the weakness of the dollar was concentrated in the sessions from Monday to Thursday, given the positive expectations for the global economic recovery and the progress in the vaccination process in advanced economies. The factors that led to the appreciation of the peso were:
- The International Monetary Fund revised up its forecast for global economic growth for 2021 to 6.0%, while the growth expected for the United States placed it at 6.4%. In addition to the vaccination process, part of the acceleration in the global economic recovery depends on the fiscal stimuli approved at the beginning of the year in the United States. It should be noted that, for Mexico, the IMF revised the growth forecast for 2021 to 5.0 percent.
- The market continues to speculate that the Federal Reserve will maintain a broadly flexible monetary stance for an extended period of time. The monetary policy minutes of the meeting held on March 16 and 17, indicated that the labor market is not yet close to levels consistent with full employment and that they will continue to support the economic recovery through a monetary stance flexible. For his part, Jerome Powell, reiterated in a panel of the International Monetary Fund that there are sectors of the economy that are still being affected by the pandemic, arguing that inflationary pressures are probably temporary and do not generate structural problems.
- The probability that Banco de México will cut the interest rate again in the year was reduced, after the March consumer inflation was published at an interannual rate of 4.67%, the highest since December 2018. The The increase was mainly due to monthly inflation of 1.69% in the non-core component, as energy prices rose. Towards the end of the year, inflation is expected to be at 4.24%, although, if inflationary pressures continue, the door opens to a scenario with a year-end forecast above 5 percent.
In the last session of the week, the dollar recovered ground and the Mexican peso weakened as the nervousness associated with a probable increase in inflation during the year increased, mainly in the United States. The higher inflation would be the consequence of a low base of comparison with respect to 2020 but also a result of the economic recovery that has pushed up the prices of raw materials globally. In China, March producer inflation was at an annual rate of 4.4%, exceeding market expectations and at its highest level since July 2018.
For its part, in the United States, producer inflation in March was 1.0% per month, after settling at 0.5% in February. At an annual rate, producer inflation stood at 4.2%, being the seventh consecutive annual increase and registering its highest level since September 2011. Annual inflation excluding food, energy and commerce was 3.1 percent.
The peso and other currencies
On the week, the euro hit a low of 1.1738 and a high of 1.1927 dollars per euro. Finally, the euro peso touched a minimum of 23.8083 and a maximum of 24.0716 pesos per euro.
At the close, interbank prices for sale stood at 20.1747 pesos per dollar, 1.3715 dollars per pound and 1.1903 dollars per euro.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.