The peso closed the session with a minimum appreciation of 0.04% or 1 cent, trading around 21.09 pesos per dollar, after touching a minimum of 20.9588 pesos per dollar, a level not seen since March 11.
The peso gave up most of its gains after the publication in the United States of the industrial production indicator for August, which showed a monthly growth of only 0.4%, evidence that the recovery in industrial activity is slowing down.
At an annual rate, industrial activity showed a contraction of 7.7%. Within the three main industries, manufacturing production was the only one that registered a monthly growth at a rate of 1%, after growing 3.9% in July.
The dollar also erased most of its losses. However, the dollar is expected to remain weak in the next few hours, while the market awaits the Federal Reserve’s monetary policy announcement scheduled for tomorrow at 1:00 p.m., where the accommodative language is expected to continue. .
The Fed’s statement will also be accompanied by an update to the inflation, growth and employment forecasts, as well as the rate expectation of the members of the Open Market Operations Committee.
This September 16 is also a holiday in Mexico and there may be a market overreaction effect due to the low volume of operations. Thus, the Fed may be the pretext for profit taking and depreciation of the peso or greater optimism that leads the exchange rate to prices close to 20.90 pesos per dollar.
The peso and the United States
In all the September 16 that have fallen during the week, from 1995 to 2019, the peso has appreciated on average 0.08%, that is, almost nothing.
The only year where it has depreciated sharply was in 2016, the US election year. However, this year the weakness of the dollar and the accumulated weeks of appreciation can make a difference.
If the exchange rate maintains its historical seasonality, it would close the following months at these prices: October 20.95, November 21.19 and December 21.38 pesos per dollar.
It is worth mentioning that the current appreciation is due to a greater inflow of capital to the country, so there are upward risks in the exchange rate, since the pandemic has not ended, the global recovery could stagnate and in particular for Mexico there could be speculation in around a credit rating cut.
It should be added that August retail sales will also be published tomorrow, Wednesday in the United States, which is expected to show a monthly growth of 1%. The data will be released at 7:30 am and could determine the performance of financial markets prior to the announcement by the Federal Reserve.
Indicators of Banxico
In the session, the exchange rate touched a minimum of 20.9588 and a maximum of 21.1271 pesos, the euro touched a minimum of 1.1840 and a maximum of 1.1900 dollars per euro. Finally, the euro peso touched a minimum of 24.9025 and a maximum of 25.0846 pesos per euro.
At the close, the interbank prices for sale were located at 21,1035 pesos per dollar, 1.2890 dollars per pound and at 11,849 dollars per euro.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.