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The peso does not show a clear trend against the dollar

The peso starts the session with little change, showing a moderate depreciation of 0.01% and trading around 20.20 pesos per dollar.

In the session, the exchange rate has traded between a minimum of 20.1762 and a maximum of 20.2498 pesos per dollar, without showing a clear trend since the market is again waiting for relevant economic indicators towards the end of the week.

The peso

In the global financial markets, gains are observed due to two factors:

First factor

Speculation about the risks to rising inflation in the United States has been temporarily reduced.

Yesterday afternoon the Secretary of the Treasury of the United States, Janet Yellen, clarified that her comments on the probable need for increases in the interest rate were not a prediction or a recommendation, adding that she respects the independence of the Federal Reserve .

It should be remembered that yesterday, Yellen’s comments contributed to significant losses in capital markets, particularly in the United States.

This morning, the futures market shows that the major indices could start with gains, with the S&P 500 advancing 0.42% and the Nasdaq rising 0.70 percent.

Second factor

Positive economic indicators were published in Europe.

In the Eurozone, the final reading of the PMI services index for April was published, which stood at 50.5 points, signaling growth in the sector for the first time since August 2020.

Inside, business confidence grew, driven by vaccination processes, which brought the business expectations index to its highest level since May 2017.

The market could find additional momentum in the publication of the ISM of services of the United States for the month of April today at 9:00 am.

Economic indicators

It is important to reiterate that the exchange market remains calm, with the dollar weighted index showing a moderate decline of 0.05%, as participants are waiting for relevant economic information to send signals about the future of monetary policy.

In Mexico, April inflation will be published on Friday at 6:00, which Grupo Financiero Base estimates at an annual rate close to 6.03 percent.

For its part, in the United States on Friday at 7:30 a.m. the non-agricultural payroll for the month of April will be published, where it is expected to show the creation of close to 1 million jobs, which would confirm an accelerated economic recovery from the United States at the beginning of the second quarter.

This data can be used to speculate on inflationary pressures in the United States.

Laboral sector

This morning in the United States, the Automatic Data Processing (ADP) employment survey estimated that 742,000 job positions were created during April, slightly below the market’s expectation of 800,000 jobs.

Going forward, inflationary pressures cannot be ruled out, since various prices in the commodity market are on an upward trend.

This morning, the price of corn remains strong at the beginning of the session trading at $ 7 per bushel, which is equivalent to an increase in its price of 0.57 percent.

Droughts in the southern hemisphere of the continent have raised the expectation that the supply of grain will decrease more than it already has, leading corn to hit a maximum of $ 7.04 per bushel, during the previous day, not seen since March 28, 2013.

For its part, the price of copper rose 0.24%, reaching close to the historical maximum of $ 10,000 per metric ton.

Finally, the price of WTI shows an advance of 1.25%, trading at 66.5 dollars per barrel, observing increases for most energy sources.

During the session, the exchange rate is expected to trade between 20.12 and 20.29 pesos per dollar.

The euro starts the session with a depreciation of 0.14%, trading at 1.1997 dollars per euro, while the pound advances 0.12% and is trading at 1.3903 dollars per pound.

Money market and debt

In the United States, the yield on 10-year Treasury bonds shows an increase of 2.3 basis points, reaching 1.46%, as the demand for risk-free assets declined at the beginning of the session.

In Mexico, the yield on the 10-year M bonds increased by 2.0 basis points, at a rate of 6.94 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 1.59% 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 20.2796 at 1 month, 20. 6363 at 6 months and 21.0990 pesos per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE

 

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