The peso starts the session with little change compared to yesterday’s close, showing a minimum appreciation of 0.03% and trading around 22.35 pesos per dollar.
During the overnight, the exchange rate has remained stable, showing a lateral behavior and trading in a channel between 22.30 and 22.38 pesos per dollar, due to the fact that market participants continue to wait for relevant economic indicators or news to be published that give direction to the exchange rate.
Today at 1:00 p.m. the monetary policy decision of Banco de México will be key, where a cut in the interest rate of 50 basis points is anticipated to 4.50%, its lowest level since 2016.
In the foreign exchange market, most currencies are gaining ground against the dollar, although a clear pattern is not observed, since currencies from emerging economies as well as from advanced economies are appreciated.
Among the most appreciated currencies are the Norwegian krone with 0.55%, the British pound with 0.42%, the euro with 0.41% and the Brazilian real with 0.21%.
The commodities market shows a mixed performance, as oil prices show little change compared to yesterday, while several metals show gains, particularly precious metals.
The price of gold advanced 0.44% to 1,924.66 dollars per ounce, while silver advanced 2.75% to 26.20 dollars per ounce.
In the case of both metals, the gains are due to a correction to the sharp falls on Tuesday and the weakening of the US dollar, as it becomes more accessible to take positions in these metals.
The peso and Covid-19
New episodes of risk aversion related to the pandemic cannot be ruled out, since in the last 24 hours there was a significant increase in Covid-19 cases around the world.
On the one hand, in Germany, 1,319 new cases were reported, the highest number since May 1.
Likewise, 65 new local infections were confirmed in Hong Kong, increasing again after the 32 cases registered last Tuesday.
On the other hand, in the United States, infections increased 1.1% in line with the 7-day moving average, accumulating a total of 5.19 million.
Indicators of Banxico
Regarding economic indicators, in the United States the initial applications for unemployment support were located at 963 thousand, below market expectations of 1.1 million and its lowest level since the pandemic began.
This is the first time in 20 weeks that they are below one million. Continuous applications for unemployment support, from those who are already receiving support or continue to wait, decreased from 16.09 billion to 15.486 million.
During the session, the exchange rate is expected to trade between 22.20 and 22.45 pesos per dollar. The euro starts the session with an appreciation of 0.36%, trading at 1.1784 dollars per euro, while the pound appreciates 0.41% and trading at 1.3034 dollars per pound.
Money market and debt
In the United States, the yield on 10-year Treasury bonds increased 0.7 basis points, at a rate of 0.68%, while in Mexico the yield on 10-year M bonds increased 1.3 basis points, at 5.80 percent.
To hedge against a depreciation of the peso beyond 22.50 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 2.10% 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 22.4273 at 1 month, 22.8287 at 6 months and 23.3069 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.