The peso begins the session with a depreciation of 0.47% or 10.8 cents, trading around 23.18 pesos per dollar, in the face of a general advance in the US currency as a result of an increase in risk aversion in global financial markets.
The advance of the dollar is related to the growth rate of new coronavirus cases, particularly in the United States, where several states have slowed their reopening process. Also in Australia, confinement measures were re-established in suburbs of the city of Melbourne.
It should be noted that yesterday, the World Health Organization (WHO), said that 6 months after the follow-up to the coronavirus pandemic began, “the worst is yet to come”, adding that half of the deaths currently occur in the continent American.
On the other hand, yesterday the Hong Kong legislature approved the national security law created by China for the region.
Just yesterday, US Commerce Secretary Wilbur Ross said the approval of that law increases the risk of key technology being transferred to China, so he announced the suspension of preferential trade treatment to Hong Kong in some areas.
In response, China’s foreign minister said this amounts to interfering in his affairs. Tensions between the two countries reduce the probability that the “phase one” trade agreement will show progress in the coming months.
Peso and oil
In the raw materials market, the price of the WTI shows a decrease of 1.86%, trading at $ 38.96 per barrel. In the capital market, the main indices in Europe show a mixed performance, while in the United States the futures market indicates a downward opening.
Regarding economic indicators, this morning the Telephone Survey of Occupation and Employment (ETOE) was published in May 2020, which showed that the unemployed population decreased by 0.2 million people to stand at a total of 1.9 million people seeking work and can’t find it.
With this, the unemployment rate in May stood at 4.2%, showing a decrease of 0.5 percentage points compared to that of April.
It must be remembered that, in the previous month, despite the loss of 12.5 million jobs (22% of jobs), the unemployment rate did not increase so dramatically because 11.5 million people left the Economically Active Population (PEA) , because people who lost their jobs were discouraged from looking for a new one or were in a situation of work suspension due to the health contingency.
On the other hand, the underemployment rate, that is, people who have the need and availability to offer more work time, increased 4.5 percentage points in May to 29.9%, rising for the second consecutive month, since in March it was located at 7.8% and in April at 25.4%.
Finally, today at 11:30 am there will be an appearance in the Financial Services Committee of the House of Representatives, which will be attended by Fed President Jerome Powell and Treasury Secretary Steven Mnuchin. Your comments could lead to speculation about the future of monetary and fiscal policy, which could cause volatility in the financial markets.
During the session, an exchange rate is expected, trading between 23.00 and 23.50 pesos per dollar. The euro begins the session with an appreciation of 0.21%, trading at $ 1.1242 per euro, while the pound depreciates 0.31% and is trading at $ 1.2298 per pound.
Money and debt market
In the United States, the yield on 10-year Treasury bonds decreased by 1.8 basis points, at a rate of 0.62%, while in Mexico the yield on 10-year M bonds decreased by 2.0 basis points, to 5.89 percent.
Peso and derivatives market
To cover a depreciation of the peso beyond 23.5 pesos per dollar, a call option, with an exercise date within 1 month has a premium of 2.36% 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 23.2798 at 1 month, 23.7066 at 6 months and 24.1819 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.