The peso starts the session with a moderate depreciation of 0.05% or 1 cent, trading around 20.10 pesos per dollar, with the exchange rate trading stable between a minimum of 20.0414 and a maximum of 20.1300 pesos per dollar, that is, an interval variation of 8.8 cents, which so far is the lowest since Friday, April 2, the day that most financial markets remained closed.
The stability of the exchange rate at current levels is due to a cautious behavior among market participants due to the following factors:
There are still inflationary risks that could push interest rates up in the coming months.
The global economy continues to recover and the United States in particular has a positive outlook.
This, although it will continue to cause bouts of optimism that benefit the performance of riskier assets and currencies from emerging economies, it also increases the probability that inflationary pressures will be observed that will force the Federal Reserve to adopt a less accommodative monetary stance as soon as in 2022.
During March, speculation about the future of monetary policy in the United States brought the exchange rate to a level of 21.63 pesos per dollar.
Today the president of the Federal Reserve, Jerome Powell, will participate in a forum of the Economic Club of Washington at 11:00 am Central Mexico time.
Little relevant economic information is published today, so volatility could be observed based on the quarterly results of financial sector issuers in the United States, as the reports from JPMorgan, Goldman Sachs and Wells Fargo were published this morning, while Bank of America and Citigroup will publish their results tomorrow, and Morgan Stanley on Friday.
So far, reports have shown that major U.S. banks have reported revenues and profits well above market expectations, as is the case with JP Morgan, which broke a single-quarter profit record of $ 14.3 billion. of dollars.
This is because issuers are beginning to reduce their loss reserves on their loans.
It should be remembered that, since March 2020, the strategy of the banking sector consisted of increasing reserves to protect itself from the delinquency that could arise in its credits.
As the vaccination campaign progresses and the economic outlook improves, banks are beginning to reduce these reserves, having more capital available for loans or investments.
In the particular case of the Mexican peso, there are internal risk factors that could limit its appreciation, highlighting the electoral process, which will probably generate temporary upward pressures for the exchange rate during May, prior to the June 6 voting.
There is also the factor of initiatives and reforms that can affect investment, with the proposed reform of the Hydrocarbons Law that will be discussed today in committees.
The labor sector and the peso
During the early hours of the day, the Chamber of Deputies of Mexico approved the reform limiting outsourcing and sent it to the Senate for review.
According to the initiative, the subcontracting scheme will only be allowed for specialized services that are not related to the main objective of the company.
In the foreign exchange market, only three currencies lose ground, the Canadian dollar with 0.19%, the Swiss franc with 0.14% and the Mexican peso with 0.07 percent.
During the session, the exchange rate is expected to trade between 20.04 and 20.20 pesos per dollar.
The euro starts the session with an appreciation of 0.14%, trading at 1.1965 dollars per euro, while the pound gains 0.09% and is trading at 1.3763 dollars per pound.
Money market and debt
In the United States, the yield on the 10-year Treasury bonds increased by 1.8 basis points, at a rate of 1.63%, while in Mexico the yield on the 10-year M bonds remained unchanged at 6.71 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 1.30% 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 20.1814 at 1 month, 20.5359 at 6 months and 21.9972 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.