The peso starts the session with a depreciation of 0.26% or 5.5 cents, trading around 21.40 pesos per dollar.
Despite the depreciation, the exchange rate remains stable compared to Monday’s session, as most financial markets globally remain calm and the dollar-weighted index is also stable, advancing only 0.03 percent. .
Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin will have a hearing before the House Financial Services Committee at 9:30 a.m.
Questions from lawmakers are expected to focus on fiscal policy and the possibility of passing the next stimulus package before the end of the year.
Financial markets are likely to remain calm while awaiting hearing, as little relevant economic information will be released today.
Although markets remain stable, there are still risks of losses from news related to the coronavirus pandemic. Deaths from Covid19 increased for the first time since April in England and Wales.
Therefore, UK officials asked people to work from home if possible, and also reported that new restrictions will be announced for bars and restaurants.
The peso and the risks
In the foreign exchange market, the most depreciated currencies are the South Korean won, which lost 0.61%, the Norwegian krone with 0.60%, the Indonesian rupiah with 0.57% and the Mexican peso with 0.36 percent.
Unlike yesterday’s session, there is a bias against the currencies of emerging economies, which tend to be the most affected by episodes of risk aversion. It should be remembered that a stagnation in economic activity could have a more severe impact on emerging countries.
In the commodities market, the price of oil starts with mixed results.
The WTI is trading at 39.53 dollars per barrel, showing an increase of 0.56%, while the price of Brent increases by 0.46%, and starts the day trading at 41.63 dollars per barrel.
However, nervousness continues around the demand for oil given the increase in the number of coronavirus cases.
To this is added the possibility that global supply increases due to a return in production in Libya, a country that is immersed in a civil war and that has led to its production remaining well below that established by OPEC and your allies.
In the capital market, moderate gains are observed in Europe, on average close to 0.50%, while in the United States the futures market shows a mixed performance, with few changes compared to yesterday’s close.
Indicators of Banxico
This is probably a sign that market participants are waiting for Jerome Powell and Steve Mnuchin to hear in the House of Representatives.
During the session, the exchange rate is expected to trade between 21.30 and 21.50 pesos per dollar. The euro starts the session with a depreciation of 0.25%, trading at 1.1747 dollars per euro, while the pound depreciates by 0.15% and is trading at 1.2798 dollars per pound.
Money market and debt
In the United States, the yield of 10-year Treasury bonds remains unchanged at a rate of 0.67%, while in Mexico the rate of 10-year M bonds shows a decrease of 0.8 basis points, to 5.94 percent.
To hedge against a depreciation of the peso beyond 22 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 1.42% 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 21.4748 at 1 month, 21.8474 at 6 months and 22.3079 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.