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The peso loses 10.7 cents against the dollar at the beginning of the day

The peso starts the session with a depreciation of 0.53% or 10.7 cents, trading around 20.19 pesos per dollar, with the exchange rate touching a minimum of 20.0917 and a maximum of 20.2347 pesos per dollar.

The foregoing is due to a moderate strengthening of the US dollar, which advanced against most currencies, with the Mexican peso being the second most depreciated after the South African rand, which lost 0.71%, followed by the Hungarian forint, which lost 0.51%, and the Swedish krona. with 0.50 percent.

Likewise, the dollar weighted index advanced 0.19% in anticipation of a more accelerated economic recovery.

In the United States, Janet Yellen noted the importance of passing robust fiscal stimulus to boost economic recovery, especially the recovery of the labor market.

The Secretary of the Treasury indicated that with the appropriate support, full employment could be returned in 2022.

However, if the necessary stimulus is not given, the labor market could take time to recover until 2025. As Yellen’s comments raise the probability that the Biden administration will push an expansionary fiscal policy in the coming months, the markets capital start the week on the rise.

The peso

In the United States, the main indices show gains close to 0.35% in the futures market, so they could reach new highs after the market opens.

On the other hand, in Europe the main indices advance on average close to 0.54%, standing out the London FTSE 100 with a gain of 1.05% and the DAX with a 0.40 percent gain.

In the commodities market, the gains also continue, with the WTI price advancing 1.11% to 57.46 dollars per barrel, with which the price is reaching a new maximum in the year and not seen since January 22, 2020.

For their part, metals also advanced with aluminum gaining 0.62%, copper 1.09% and gold 0.51 percent.

The advance in the prices of raw materials, mainly industrial ones, make it clear that the depreciation of the peso and most currencies this morning is not the result of a greater perception of risk.

Stimulus

In relevant news, the Ministry of Finance reported that as of Friday the stimulus in the collection of the Special Tax on Production and Services (IEPS) on gasoline was reactivated.

The stimulus is 2.79% per liter for gasoline below 91 octane, so consumers will now pay about 4.9719 pesos per liter, instead of 5.1148 pesos.

On the other hand, it is circulated in the media that today the Bank of Mexico, the Ministry of Finance and the Bank of Mexico Association will present a proposal to support migrants and their families to address the problem raised in the reform of the Bank of Mexico Law .

It is a mechanism for Mexican families to exchange dollars in cash in the national territory through the Banco del Bienestar.

It is important to remember that the proposal to reform the Bank of Mexico Law had generated a greater perception of relative risk on the Mexican economy, since it undermines the autonomy of the Central Bank.

In this sense, today’s proposal will be relevant as it could reduce or eliminate the probability that Banxico’s autonomy will be violated.

Economic situation

Regarding economic indicators, the Consumer Confidence Indicator (ICC) for January increased slightly compared to December, advancing 0.3 points and being the second consecutive monthly increase.

The indicator stood at 38.4 points, still 4.9 points below what was observed a year ago, adding 14 months of annual setbacks.

In the interior, four of its five components registered monthly advances, highlighting the economic situation of the country today, compared to 12 months ago (+1.0 points), although at the annual rate it continues to be the component that lags the most (-8.2 points) .

For its part, the only component that showed a monthly decline was that of the expected economic situation of household members within 12 months, compared to the current one (-0.9 points), the decrease reflects the increase in cases of coronavirus that it was lived during the first month of 2021, which led 11 states to return to red light.

Going forward, the slow vaccination process that has been observed in Mexico could cause consumer confidence to take longer to recover.

Automotive industry

For its part, in January automotive sales amounted to 81,203 units, the lowest for the same month since 2012.

In annual terms, auto sales deepened their decline, going from a 19.4% contraction in December to 22.5% in January.

For its part, car production stood at 278,711 cars, equivalent to an annual fall of 15.0%, after showing three months of increases and being the highest since June 2020.

Likewise, automotive exports registered a total of 223,533 cars, decreasing at an annual rate of 6.4%, after three months of progress.

This, as a consequence of the fact that 11 states were placed on maximum alert in January and although the automotive sector has been classified as essential, it is not exempt from the restrictions.

During the session, the exchange rate is expected to trade between 20.09 and 20.34 pesos per dollar.

The euro starts the session with a depreciation of 0.17%, trading at 1.2025 dollars per euro, while the pound loses 0.33% and is trading at 1.3689 dollars per pound.

Money market and debt

In the United States, the yield on 10-year Treasury bonds increases by 2.4 basis points, to 1.19 percent, a level not seen since March 19, 2020, while in Mexico the yield on 10-year M bonds increases 2.0 basis points, at a rate of 5.60 percent.

The peso and the derivatives market

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 1.76% 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 20.2762 at 1 month, 20.6122 at 6 months and 21.0214 pesos per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE

 

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