The peso wins against the dollar: starts at 21.91

The peso starts the session with an appreciation of 0.41% or 9.1 cents, trading around 21.91 pesos per dollar, given an increase in risk appetite in global financial markets.

This is due to the fact that the United States Trade Representative and the Secretary of the Treasury spoke with the Vice Premier of China last night in a biannual review of the progress of the phase one trade agreement reached in January.

According to the statement, they promised to continue promoting the agreement.

Moving forward during the election period, trade cooperation is likely to continue, as the phase one deal provides for the purchase of US grains by China, which is attractive to Donald Trump’s voter base.

In the foreign exchange market, the most appreciated currencies are the South African rand with 1.19%, the Norwegian krone with 0.62%, the British pound with 0.59% and the Mexican peso with 0.41%.

In contrast, few currencies lose ground, limiting themselves to the Japanese yen, which depreciates 0.29%, the Turkish lira with 0.24% and the Russian ruble with 0.22 percent.

In the capital market optimism is once again observed in Europe, with most of the main indices advancing on average 0.80%, while in the United States the futures market indicates an opening with gains close to 0.50%, indicating that the S&P 500 could hit a new all-time high this morning.

The peso and oil

For their part, oil prices started the session higher, with the WTI advancing 0.31% to 42.77 dollars per barrel.

Crude prices are likely to maintain an upward trend, exceeding the level of $ 43 per barrel, as platforms and refineries in the Gulf of Mexico have been closed, in anticipation of the expected arrival of Tropical Storm Laura on Thursday. upgrade to hurricane status in the next few hours.

Evacuations have halted about 80% of the Gulf’s oil production. On the other hand, in the commodities market, the appetite for risk has limited the demand for gold as a safe haven asset, so its price falls 0.39% to $ 1,921.32 per ounce.

Construction in Mexico

Regarding economic indicators, today at 9:00 am the Balance of Payments in Mexico will be released.

On the other hand, the National Survey of Construction Companies (ENEC) in June, the first month of the new normal, showed a slight recovery in the value of construction companies production by increasing by 2.39% per month, after 16 months of setbacks. However, it is far from a complete recovery, since in annual terms it presented the second largest drop on record of 32.30 percent.

On the other hand, the hours worked of the construction companies showed an advance of 6.44% per month, after 8 months of decline and supported by the return of private sector activities after a month and a half of suspension.

Indicators of Banxico

In annual terms, they are 22.17% below what was observed in June 2019. In original figures, the value of the production of the public and private sectors showed similar annual falls, of 31.74% and 31.26%, respectively.

The above, despite the fact that the public sector began construction work on the Mayan Train in the reference month.

During the session, the exchange rate is expected to trade between 21.85 and 22.09 pesos per dollar. The euro starts the session with an appreciation of 0.25%, trading at 1.1817 dollars per euro, while the pound appreciates 0.50% and is trading at 1.3128 dollars per pound.

Money market and debt

In the United States, the yield on the 10-year Treasury bonds increased by 4.4 basis points, at a rate of 0.70%, while in Mexico the yield on the 10-year M bonds remained unchanged, at 6.03 percent.

Derivatives market

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 1.35% 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 22.0041 at 1 month, 22.3920 at 6 months and 22.8772 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE