The peso begins the session with a depreciation of 0.23% or 4.6 cents, trading around 20.07 pesos per dollar, after the exchange rate touched a low of 19.9615 pesos overnight.
For now, a clear increase in demand for dollars continues to be observed at levels below the support of 20.00 pesos per dollar, which prevents the exchange rate from continuing its downward trend.
In the foreign exchange market, currencies show a mixed behavior, with the peso being the second most depreciated currency after the South African rand, which lost 0.38%. They are followed by the Australian dollar with a depreciation of 0.22%, the Russian ruble with 0.20% and the Canadian dollar with 0.16 percent.
It is worth mentioning that these depreciations are moderate and are not due to an increase in the perception of risk in global financial markets.
It is important to mention that as of today the peso accumulates a monthly appreciation of 5.16% or 1 peso and 9 cents, so it is on its way to being the highest monthly appreciation since May, when the peso recovered 8.27% and before this, since July 2018 when the peso advanced 6.33% after concluding the presidential elections in Mexico.
In the capital market, the main European indices show a mixed performance with few changes compared to yesterday’s closing, losing an average of 0.06 percent.
In the United States, the futures market shows that the Dow Jones and S&P 500 are likely to enter the session with moderate losses, after strong gains were seen yesterday that took the Dow Jones to a new all-time high, fueled by optimism from a vaccine against Covid-19 and the beginning of the presidential transition process in the United States.
It is worth mentioning that the Dow Jones accumulates an advance of 13.38% in the month, being the largest monthly increase since January 1987, when the index gained 13.82 percent.
For its part, the S&P 500 accumulates a monthly gain of 11.18%, being so far the largest monthly advance since April, when the index observed a rebound effect of 12.68% after falls at the beginning of the year and before this, it would be the largest advance monthly since January 1987, when the index gained 13.18 percent.
The raw materials market also shows a mixed performance, with moderate losses for most industrial metals, such as aluminum, which lost 0.15%, copper, which fell 0.12%, and steel, with a decline of 0.67 percent.
For its part, the price of oil continues to advance, with the WTI gaining 0.87% and trading at 45.30 dollars per barrel, while the Brent advances 0.94% to 48.31 dollars per barrel, which has mainly driven two currencies in the exchange market, the Brazilian real that appreciates 0.41% and the Norwegian crown that advances 0.39 percent.
It should be noted that yesterday afternoon, Republican and Democratic lawmakers reached an agreement on the annual spending budget.
This allows the government to continue operating after current financing runs out on December 11.
Due to the Thanksgiving holiday, some relevant economic indicators were advanced in the United States.
The weekly employment report, corresponding to the week that ended on November 21, registered 778 thousand new applications for unemployment support, its highest reading in five weeks, since the week ended on October 16, which stood at 797 thousand applications .
On the other hand, continuous applications for unemployment support, from those people who are already receiving support or continue to wait, decreased from 6.37 million to 6.07 million.
Likewise, the preliminary trade balance of goods for the month of October was published, which showed a trade deficit of 80.3 billion dollars, increasing by 1.2% compared to the previous month.
In the interior, exports and imports increased at a monthly rate of 2.9% and 2.2%, respectively.
At 9:00 am, the October Personal Income and Expenditure report will be published, while at 1:00 pm the minutes of the last monetary policy meeting of the Federal Reserve will be released.
The peso and purchases
In Mexico, retail sales in September extended their recovery by growing 2.67% monthly, reaching 7.97% below what was observed in September 2019, spinning eight months of annual falls.
By branch of economic activity, the greatest monthly advances in retail sales were recorded in footwear (35.53%) and clothing (24.76%), after being one of the most affected sectors during the months with the greatest mobility restrictions.
In contrast, used items and health care items showed monthly drops of 4.31% and 2.53%, respectively.
In particular, the decline in the latter could be related to the decrease in the number of daily coronavirus infections in September compared to the previous two months.
Transport and tourism
On the other hand, the results of the Monthly Survey of Services corresponding to the month of September were published, which show a monthly growth of 4.2% in total income from the supply of goods and services.
With this, an annual contraction of 18.2% is observed, and it would still need to grow 14.2% in one month to reach the level observed in March, prior to the start of the pandemic.
However, the recovery is slowing, as September growth is the lowest since the recovery began in July and much lower than the 7.2% monthly growth in August.
By sector of economic activity, monthly contractions were observed in educational services (-4.9%) and professional, scientific and technical services (-5.0%). The latter contracted for the second consecutive month and practically returned to the same level as in April.
Indicators of Banxico
The rest of the sectors showed positive growth rates, highlighting the growth in the services of restaurants, bars and hotels (+ 14.0%) and those of transport, mail and storage (+6.0 percent).
In annual terms, the most affected continue to be leisure, cultural, sports and other recreational services (-53.5%), restaurants, bars and hotels (-36.2%) and transportation, mail and storage (-26.2 percent).
In Mexico, today it will be relevant the publication of the Balance of Payments data for the third quarter at 9:00 a.m., while at 12:00 noon will be the publication of the quarterly inflation report of Banco de México, where it will be key the revision to its forecasts of inflation and economic growth.
During the session, the exchange rate is expected to trade between 19.96 and 20.19 pesos per dollar. The euro starts the session with an appreciation of 0.09%, trading at 1.1903 dollars per euro, while the pound shows a depreciation of 0.15% and is trading at 1.3337 dollars per pound.
Money market and debt
In the United States, the 10-year Treasury bond yield decreases by 1.0 basis point, at a rate of 0.87%, while in Mexico the 10-year M bond yield increases by 2.3 basis points, to 5.87 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 1.58% 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 20.1456 at 1 month, 20.4648 at 6 months and 20.9127 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.