The peso begins the session with a depreciation of 1.34% or 31.7 cents, trading around 23.97 pesos per dollar, before a general strengthening of the US dollar against its main crosses and currencies from emerging economies.

In the previous two weeks, the dollar lost strength in anticipation of a greater economic reopening among the countries most affected by the coronavirus in recent months.

However, caution is observed this morning because in South Korea, a country that has stood out for the good administration of the crisis, there was an increase of 34 cases during the weekend, something that did not happen in a month.

South Korean President Moon Jae-In highlighted the risk of a second wave of the epidemic at any time.

Although sentiment in financial markets, particularly in the capital market, has been mainly positive since April, in anticipation of a V-shaped economic recovery, news such as that of South Korea generates nervousness as this expectation is questioned, which it also affects the valuations of companies.

In Europe, the main indices in the capital market recorded falls of over 1%, while in the United States, the futures market indicated a negative opening.

The peso and commodities

In the raw materials market, the price of oil starts the week lower, with the WTI price showing a 3.15% drop and trading at $ 23.96 per barrel.

During the week, participants in the raw materials market will be on the lookout for OPEC’s monthly oil market report, scheduled for Wednesday.

As for economic indicators, little information will be released during the week. In Mexico, the industrial production for March stands out, which will be published on Tuesday morning, as well as the formal job creation of the IMSS, which is scheduled to be published throughout the week.

For its part, on Thursday Banco de México’s monetary policy decision will be announced, where an interest rate cut of 50 basis points to 5.50 percent is expected.

In the United States, the most relevant statistics will be inflation for April, which will be published on Tuesday at 7:30 a.m. and is likely to be below the interannual rate of 1.5% in March.

Proximate indicators

Towards the end of the week key data for April will also be released, such as retail sales for the month and industrial production.

Due to the nature of the data, market speculation is likely to focus on the future of monetary policy in the United States. On Wednesday, Federal Reserve President Jerome Powell will give a press conference on economic prospects at 8:00 am.

During the session, an exchange rate is expected, trading between 23.50 and 24.50 pesos per dollar. The euro begins the session with a depreciation of 0.19%, trading at $ 1.0818 per euro, while the pound loses 0.87% and is trading at $ 1.2302 per pound.

Money and debt market

In the debt market, the yields of 10-year Treasury bonds in the United States and 10-year M-bonds in Mexico remain unchanged compared to the end of the previous week, at rates of 0.69% and 5.90% , respectively.

Derivatives market

To hedge against a depreciation of the peso beyond 25 pesos per dollar, a call option, with an exercise date within 1 month has a premium of 1.82% 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 24.0366 at 1 month, 24.4997 at 6 months and 24.9607 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE