In line with expectations, the peso begins the session with an appreciation of 0.41% or 8.2 cents, trading around 19.78 pesos per dollar and approaching the key support of 19.70 pesos per dollar on December 12.
This morning the exchange rate touched a low of 19.7378 pesos per dollar, as the appetite for risk rose due to the probability that a new fiscal stimulus package will soon be approved in the United States.
In the broad basket of main crosses, all currencies are gaining ground this morning, with the Mexican peso ranking 17th, showing that the appreciation of the peso is part of a general market movement.
The weighted index of the dollar lost 0.44%, its fourth consecutive decline accumulating a fall of 1.14% in the week.
In the United States, legislators are expected to present a stimulus proposal close to 900 billion dollars today.
According to knowledgeable people, the package includes a round of direct payments of $ 600, unemployment benefits of $ 300 and about $ 17 billion for airlines.
However, support for state and local governments is omitted. Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi have been directly involved in the negotiations so it is hoped that once the legislation is written, it will move quickly to the vote. McConnell warned senators to be prepared to work through the weekend, as approval of the fiscal 2021 spending package is also pending.
The peso, indices and oil
The financial markets show a particularly positive performance, since in Europe the main indices advance 0.64% on average, while in the United States the futures market shows that the main indices could gain close to 0.50% at the opening and it is likely that all three major indices reach new all-time highs during the session, mainly the Nasdaq.
For their part, WTI and brent reached new highs since March, of 48.59 and 51.90 dollars per barrel, respectively, given the optimism generated by the coronavirus vaccines and the expectation that they can boost the global economic recovery and the mobility of people .
Although there is optimism in the markets for the likely fiscal stimulus in the United States, there is still negative news about the advance of the coronavirus pandemic.
In Denmark, a new record of daily cases was registered, so the authorities indicated that they will have a partial shutdown of the economy.
Starting this weekend, all non-essential stores will be closed and students will have to take virtual classes, the measures will be in effect at least until the first week of January.
For its part, in Germany 45,113 infections were registered in the last 24 hours, reaching a new maximum since the pandemic began.
In California, a new maximum of daily infections was registered, with 53,711 new cases. While, in the United States, 3,835 deaths from Covid19 were reported in the last 24 hours, a new record.
Regarding economic indicators, the weekly employment report showed that in the week ending December 12, 885 thousand new applications for unemployment support were reported, increasing by 23 thousand units compared to the previous week, contrary to what the market expected a decrease of 35 thousand.
On the other hand, continuous applications for unemployment support, from those people who are already receiving support or continue to wait, decreased from 5,781 million to 5,508 million.
On the other hand, in Mexico, the National Minimum Wage Commission (Conasami) approved the 15% increase in the minimum wage proposed by President López Obrador.
With the previous one, the general minimum wage will go from 123.22 to 141.70 pesos and that of the border from 185.56 to 213.39 pesos.
The approval came despite the fact that private initiative had been against it, proposing a 10% hike. The approval of the increase to the minimum wage has not had an effect on the financial markets in Mexico.
The Monthly Survey of the Manufacturing Industry (EMIM) for October revealed that employed personnel in manufacturing increased 0.34% per month, which is why it is still 2.33% below what was observed in October 2019.
On the other hand, the hours worked showed a growth of 1.17% compared to September, although in their annual variation they still show a fall of 3.01 percent.
Regarding real average salaries, an advance of 1.61% per month and 2.52% per year was observed, being the highest annual increase since December 2019.
For its part, the plant capacity used was 78.4%, registering a higher percentage than that observed 12 months ago (77.9%), according to original figures.
This, in consistency with greater economic openness and the good performance that has been observed in manufacturing activity.
Finally, the value of production registered a real annual increase of 4.37%, spinning up two months and representing the greatest advance since September 2018.
In general, the speed of the recovery in manufacturing activity is largely due to a greater dynamism in external demand.
Additionally, INEGI published the Timely Indicator of Economic Activity (IOAE) that estimates in advance the variations of the IGAE for November, which foresees a contraction of 5.0% annually.
Indicators of Banxico
By sectors, the indicator suggests an annual contraction of 5.3% in secondary activities, while in tertiary activities the expected fall is 4.8 percent.
During the session, the exchange rate is expected to trade between 19.72 and 19.97 pesos per dollar. The euro starts the session with an appreciation of 0.45%, trading at 1.2255 dollars per euro, while the pound shows an appreciation of 0.64% and is trading at 1.3595 dollars per pound.
Money market and debt
In the United States, the yield on 10-year Treasury bonds increased 0.7 basis points, to 0.92%, while in Mexico the yield on 10-year M bonds remained unchanged at a rate of 5.67 percent.
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 1.97% 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 19.8559 at 1 month, 20.1903 at 6 months and 20.6087 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.