The peso begins the session with a depreciation of 0.40% or 9.03 cents, trading around 22.46 pesos per dollar, after the weekly employment report for the week that ended on July 18 was published in the United States.
Initial requests for unemployment support stood at 1,416 million, up from 1.3 million reported in the prior week. This is the first increase in new applications for unemployment support since the last week of March.
Applications have remained above one million for 18 consecutive weeks, indicating that the recovery in the labor market is stagnating, as the sustained increase in coronavirus cases slowed the process of economic reopening in the country, particularly in the service sector.
On the other hand, continuous applications for unemployment support, which shows people who are currently receiving the benefit or who are still on hold, decreased from 17,304 to 16,197 million.
It is worth mentioning that the additional benefit of 600 dollars of unemployment insurance expires on July 31, so the negotiations of the new stimulus package should conclude next week.
Peso and oil
In the raw materials market, the price of oil begins the session with slight losses due to the nervousness surrounding demand, as the number of coronavirus cases continues to rise.
The WTI begins the session trading at $ 41.75 per barrel, which is equivalent to a contraction in its price of 0.36 percent.
For their part, precious metals continue to win amid concerns about the coronavirus and economic activity, low interest rates, and heightened political tensions between China and the United States.
Gold hit a new annual high of $ 1,888.57 per ounce, approaching its all-time high of $ 1,921.18 per ounce not seen since Sept. 6, while the price of silver peaked at $ 23,2735 not seen since Sept. 19. September 2013.
The capital market has focused on the publication of quarterly results in the United States during the day, which is why there are gains.
In Europe, the main indexes advance on average about 0.50%, while in the United States the futures market shows that the main indexes will start the session with gains close to 0.40%.
On the other hand, in Mexico, the inflation of the first fortnight of July was published, standing at an interannual rate of 3.59%, slightly above market expectations, given a biweekly increase of 0.36 percent.
Inflationary pressures were balanced between the underlying and non-underlying components.
On the one hand, the underlying component showed a year-on-year inflation of 3.84%, when biweekly increases in prices of food merchandise (0.32%) and non-food (0.42%) were observed, showing that demand for non-essential goods continued to recover.
The lack of a reactivation of the services sector was evident, since the sub-index of the sector showed an increase in prices of 0.12% every two weeks. For its part, the non-core component registered an interannual increase of 2.79%, compared to a fortnightly increase of 0.69 percent.
Agricultural product prices fell at a biweekly rate of 0.26%, but energy prices rose 2.09%, due to a biweekly increase of 3.03% for low-octane gasoline and 2.84% for high-octane gasoline.
The price of LP gas also rose 1.21% biweekly. It should be noted that the increase in inflation has been gradual and does not change the expectation that Banco de México will cut its target interest rate to 4% towards the end of the year.
In Mexico, the National Survey of Construction Companies (ENEC) was also published in May, which revealed that the value of the sector’s production decreased 5.20% monthly in seasonally adjusted figures, after having fallen 19.07% in April.
At the annual rate, it showed a contraction of 34.23%, the biggest drop in the registry and 23 consecutive months of decreases.
By subsector, annual contractions were more severe than those observed the previous month in its three areas: specialized works of 36.13% (vs. 30.23%), construction of civil engineering works of 35.63% (vs. 33.95%) and construction with 34.20% (vs. 30.30 percent).
Regarding the contracting sector, a more profound drop was observed in the production generated by the private sector of 36.75% per year, when it was forced to suspend work throughout April and resume operations in mid-May, under strict sanitary protocols; For its part, the public sector showed less weakness than what is usually observed in relation to the private sector, falling 31.99% annually, this due to the fact that some works in this sector were allowed to continue operating during the health contingency.
Today, the exchange rate is expected to trade between 22.40 and 22.65 pesos per dollar. The euro starts the session with a depreciation of 0.11%, trading around $ 1.1557 per euro, while the pound depreciates 0.35% and is trading at $ 1.2690 per pound.
Money and debt market
In the United States, the yield on 10-year Treasury bonds decreased 1.3 basis points, at a rate of 0.58%, while in Mexico the yield on 10-year M bonds began with little change from yesterday’s close, ranking at 5.74 percent.
To hedge against a depreciation of the peso beyond 23 pesos per dollar, a call option, 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 level mentioned above.
On the other hand, the interbank forward for sale is at 22.5606 at 1 month, 22.9516 at 6 months and 23.3966 pesos per dollar at one year.