The peso begins the session with an appreciation of 0.17% or 3.5 cents, with the exchange rate trading around 20.28 pesos per dollar, after reaching a maximum on Thursday, April 1, of 20.4974 pesos.
Since Friday, the main factor that has generated volatility in financial markets has been the publication of the monthly employment report in the United States.
The non-farm payroll showed that 916 thousand job positions were created during March, exceeding market expectations of 650 thousand jobs and being the largest monthly increase since August 2020.
By sector, the greatest job creation was observed in leisure and hospitality companies (+280 thousand), where 176 thousand were jobs created in the restaurant and bar subsector, driven by the relaxation of confinement measures in the United States .
Lower liquidity is still observed, due to the fact that some markets remain inactive. In China, today is commemorated the Day of the Ancestors, while in some European countries today it is celebrated on Easter Monday, so the capital and bond markets are not operating either.
In the case of the Mexican peso, the appreciation is attributed to a greater appetite for risk, since the employment report in the United States reflects the economic recovery.
This also generates a weakening of the dollar against its main crosses in the foreign exchange market, despite the fact that in recent weeks it has been speculated that the recovery of the United States economy could be being accelerated enough to generate inflationary pressures, which has strengthened speculation that the Federal Reserve could moderate its expansionary monetary stance.
It is important to mention that, as of Sunday, April 3, the summer schedule entered Mexico, homologated with that of the United States.
The local stock market will return to its traditional hours of operation, from 8:30 a.m. to 3:15 p.m.
Regarding economic indicators in Mexico, the Business Confidence Indicator (ICE) for the month of March showed a reduction in pessimism in the four surveyed sectors (manufacturing, commerce, construction and services).
However, all sectors remain below the optimism threshold of 50 points and the level observed 13 months ago.
Going forward, there are factors that could continue to inhibit business confidence: 1) pressure from business groups in the United States and the Office of the Trade Representative (USTR), due to the alleged violation of the USMCA by Mexico, 2) the slow evolution of the vaccination program in the country (5.74 vaccinated per 100 inhabitants as of March 30), 3) the possible progress in the reform of the Hydrocarbons Law in Congress, 4) the likely rise in COVID-19 cases after the Easter holiday period and 5) uncertainty over other unorthodox economic policies.
On the other hand, additional information will be published during the morning at 9:00 a.m., such as the flow of remittances during February and the Bank of Mexico‘s Survey of Specialists, corresponding to March.
During the session, the exchange rate is expected to trade between 20.17 and 20.40 pesos per dollar. The euro starts the session with a moderate appreciation of 0.02%, trading at 1.1761 dollars per euro, while the pound advances 0.25% and is trading at 1.3867 dollars per pound.
Money market and debt
In the United States, the yield on 10-year Treasury bonds increases by 1.6 basis points, at a rate of 1.74%, while in Mexico the yield on 10-year M bonds decreases by 6.2 basis points, at 6.84 percent .
Derivatives market and the peso
To hedge against a depreciation of the peso beyond 20.50 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 1.83% 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 20.3312 at 1 month, 20.6789 at 6 months and 21.1570 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.