The peso appreciates, while the dollar is weak

The peso starts the session with little change compared to the close of Friday, showing an appreciation of 0.01%, trading around 19.91 pesos per dollar. There is no clear direction in the foreign exchange market, where currencies show mixed performance.

The dollar weighted index remains weak, falling 0.11%, the fourth consecutive fall, given speculation that the US labor market could recover slower than anticipated, after the non-farm payroll on Friday of last week showed that April job creation was the lowest since January, with 266,000 new job positions.

It should be remembered that the data was also well below the expectation that one million jobs would be created during the month.

Market concerns include the possibility that unemployment support programs are slowing down job search, especially in lower-income positions.

This reduces the likelihood that the Fed will abandon its largely flexible stance in the coming months.

The peso

As little relevant economic information is released today, at the beginning of the week currencies are likely to move based on the performance of other financial markets, mainly commodities.

This morning energy, as well as industrial and precious metals show significant gains, with WTI advancing 0.91%, Brent 1.04% and gasoline 1.91 percent.

For its part, the price of aluminum rose 1.50%, copper 2.79% and iron 6.59 percent.

The upward pressure on energy prices is due to the fact that last Friday the most important oil pipeline network in the United States was inactive after a cyberattack and it was not possible to restore service until this morning.

Meanwhile, the upward pressures on metal prices, mainly iron and copper, are due to the expectation that central banks, mainly the Federal Reserve, will maintain a flexible stance even if inflation rises over the next few months. months.

It should be noted that the price of copper is at its historical maximum of 10,729 dollars per metric ton.

Prices

During the week, the publication in the United States of April inflation on Wednesday 12 at 7:30 am will be relevant, which is estimated to be at an annual rate of 3.7 percent.

This week, President Joe Biden will meet with Republican lawmakers, Mitch McConnell and Kevin McCarth, to discuss his nearly $ 4 trillion economic plan.

Republicans are expected to offer counterproposals for the infrastructure plan and the family support plan.

For its part, in Mexico the announcement of Banco de México’s monetary policy scheduled for Thursday the 13th at 1:00 p.m. stands out, where Grupo Financiero Base anticipates that the Governing Board will keep the target interest rate unchanged at 4.00 %.

The industry in Mexico

Regarding economic indicators, today the Monthly Indicator of Industrial Activity by federal entity for January was published in Mexico, which showed a monthly growth of industrial activity in 21 states, standing out Zacatecas (10.08%), Chiapas (7.82%), Quintana Roo (6.74%), Michoacán (6.56%) and Baja California Sur (4.65 percent).

In contrast, the states with the highest monthly contractions during the month of January were: Puebla (-2.54%), Morelos (-2.11%), Mexico City (-1.24%) and Sonora (-1.21 percent).

At an annual rate, only 9 states showed positive growth in January: Oaxaca (29.61%), Chiapas (20.99%), Baja California (9.54%), Aguascalientes (5.41%), Coahuila (3.43%), Chihuahua (3.40%), Zacatecas (0.65%), Querétaro (0.33%) and Jalisco (0.27 percent).

It should be noted that the states of: Tamaulipas (-12.67%), Puebla (-12.22%), Mexico City (-8.50%), Guanajuato (-2.23%), State of Mexico (-2.44%) and Nuevo León (-1.93%), which explain 34.07% of industrial activity, showed annual contractions in January, although an almost complete recovery is observed for the states of Guanajuato, State of Mexico and Nuevo León.

During the month of February and March, the industrial activity data by state is expected to continue showing sluggishness, affected by 1) the global shortage of semiconductors, 2) adverse weather conditions and 3) weak domestic demand.

It should be remembered that as of March a recovery in economic activity was observed, but this was mainly due to the services sector.

Tourism and peso

Additionally, INEGI published the results of the International Traveler Survey for the month of March 2021, which shows that 4,208,691 visitors entered the country in the month and 2,284,080 of them were international tourists.

This figure represents a decrease of 36.0% compared to the same month last year, when a strong impact of the pandemic was already observed in countries such as China, the United States, Spain and Italy, and it was beginning to affect Mexico.

Although the annual rate shows an improvement, going from a contraction of 58.3% in February to that of 36.0% in March, the number of visitors is still 48.4% below pre-pandemic levels (February 2020).

Total visitor spending was $ 1,234.2 million, averaging $ 293.24 per visitor.

Total spending shows a contraction of 10.1% compared to the same month last year, but average spending has increased by 40.5% during the same period.

For next month, a positive annual change rate will be observed since in April 2020 there was an entry of only 2.2 million visitors after confinement at a global level and the comparison base is low.

If the March revenue figure remains the same during April, the growth rate would be close to 188%, however, this would not represent a recovery from the crisis in the tourism sector.

Pandemic and vaccination

The figure will be even higher, as the number of visitors will continue to increase as the vaccination campaigns advance, especially in the United States where they expect to have 70% of its population by July 4 with at least one dose of the vaccine administered. .

This will result in a propellant for tourism in Mexico, as it is one of the most frequented tourist destinations by North Americans.

During the session, the exchange rate is expected to trade between 19.87 and 20.03 pesos per dollar.

The euro starts the session with an appreciation of 0.01%, trading at 1.2167 dollars per euro, while the pound advances 1.06% and trading at 1.4132 dollars per pound.

Money market and debt

In the United States, the yield on the 10-year Treasury bonds remains unchanged at 1.57%, while in Mexico the yield on the 10-year M bonds decreases by 1.1 basis points, at 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 1.95% 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 19.9775 at 1 month, 20.3170 at 6 months and 20.7634 units of peso per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE