The peso begins the session with an appreciation of 0.65% or 13.2 cents, trading around 20.26 pesos per dollar and ranking as the third most appreciated currency in the wide basket of main crosses, with the exchange rate touching a low of 20.1874 and a maximum of 20.3937 pesos.
During the first two sessions of the week, the Mexican peso accumulates an appreciation of 1.54% or 31.6 cents, due to the expectation of greater fiscal stimuli in the United States that could be particularly beneficial for Mexico, as they would help the economic recovery to continue. through exports.
It should be remembered that Mexico is one of the main commercial partners of the United States and directs about 80% of its exports to that country.
During Monday’s session, a meeting was held between Republican and Democratic leaders in Congress to discuss the fiscal support program, which were described as fruitful.
However, the Joe Biden administration has sent the signal that approval of the new package will likely be attempted without a bipartisan agreement.
In line with the above, yesterday the speaker of the House of Representatives, Nancy Pelosi and the leader of the majority in the Senate, Chuck Schumer, presented the proposal for a budget reconciliation, a process that would allow the approval of most of the stimuli included within of the package proposed by Joe Biden with a simple majority.
Democrats hope to pass the new stimulus in March, before current supports expire.
The peso and oil
The first two days of the week have also seen a return of optimism and stability in other financial markets, particularly the capital market.
In Tuesday’s session, the capital markets in Europe show an average advance of 1.35%, while in the United States the futures market shows a positive performance, which could turn into gains for the second day in a row.
In the commodity market there are also gains. Oil prices rise with the expectation that the vaccination process against Covid19 will allow the demand for hydrocarbons to recover during the year.
WTI hit a high for the year of $ 54.96 per barrel, while the price of brent hit a high of $ 57.77. However, there are two latent downside risks to the price of oil.
On the one hand, the recent increase in prices could increase the US oil supply, affecting the efforts of OPEC + and reducing the incentives to continue with the cuts. On the other hand, Russia‘s oil production increased significantly.
Additionally, corn hit a high of $ 5.55 per bushel, not seen since June 21, 2013, after it became known that China had reserved nearly 6 million tons of the US crop.
On the other hand, the price of silver starts the session with a loss, after hitting an 8-year high of $ 30,1003 per ounce on Monday, due to demand by retail investors.
Silver followed the same buying pattern as some stocks on the US stock market, after investors organized themselves on social media and caused the so-called “short squeeze.”
In the foreign exchange market, the most appreciated currencies this morning against the dollar are the Brazilian real with 0.94%, the Russian ruble with 0.78%, the Mexican peso with 0.65%, the South African rand with 0.62% and the Canadian dollar with 0.33%, all countries that produce oil or raw materials.
Regarding economic indicators, the GDP of the Eurozone fell at a quarterly rate of 0.7% during the last quarter of 2020. Compared with the fourth quarter of 2019, the GDP of the Eurozone contracted 5.1 percent.
Thus, the average fall in 2020 was 6.8%, exceeding the fall observed in 2009 of 4.5%. The data was already anticipated by market participants, so it did not affect the gains observed in the capital market.
In Mexico, INEGI released the Monthly Business Opinion Survey (EMOE) for the month of January. In figures adjusted for seasonality at the sector level, the Business Confidence Indicator (ICE) of manufacturing presented a slight advance compared to December of 0.09 points, to settle at 43.1 points.
Likewise, the ICE for trade showed a slight monthly increase of 0.06 points, standing at 44.0 points.
For its part, the ICE for construction stood at 43.9 points, showing a monthly advance of 0.57 points.
Finally, in original figures, the ICE of non-financial private services is 7.25 points below January 2020, standing at a level of 38.8 points.
The figures show that business confidence continued to improve despite the trajectory of the pandemic in January, although all sectors are still below the optimism threshold of 50 points, where the most depressed is the services sector, since it has been the one that more have faced operating restrictions.
During the session, the exchange rate is expected to trade between 20.19 and 20.45 pesos per dollar. The euro starts the session with a depreciation of 0.19%, trading at 1.2037 dollars per euro, while the pound loses 0.04% and is trading at 1.3657 dollars per pound.
Money market and debt
In the United States, the yield on 10-year Treasury bonds increases by 3.4 basis points, to 1.11%, while in Mexico the yield on 10-year M bonds increases by 1.4 basis points, at a rate of 5.62 percent .
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 1.94% 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 20.3143 at 1 month, 20.6456 at 6 months and 21.0620 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.