The peso begins the quarter with an appreciation of 0.61% or 14.0 cents, trading around 22.83 pesos per dollar and moving alongside other currencies of emerging economies such as the Brazilian real and the South African rand, which are appreciated at 1.22 and 1.13% , respectively.
Peso and context
Today’s appreciations occur despite a higher perception of risk in global financial markets, mainly due to the following factors:
First factor
Coronavirus cases continue to rise, with the United States standing out, where new infections on record are close to 50,000 daily. Yesterday, the director of the Institute of Infectious Diseases in that country, Anthony Fauci, reported to a Senate panel that the cases could amount to 100,000 daily, since there is no control over the pandemic.
The accelerated growth of new cases reduces the probability that the US economy will recover quickly.
Second factor
Tensions between the west and China have risen after the first arrests were made under the new national security law in Hong Kong, which includes measures such as life imprisonment for subversion, which is interpreted as aggressive rejection. to any type of protests and political liberties in the region.
Third factor
Caution in anticipation of monthly employment data to be published in the United States, as the publication of the non-agricultural payroll for June is scheduled for Thursday at 7:30 am. It is expected that 3,074 million jobs were created in the United States in that month, up from the 2,509 million created in May.
The Fed
It should be added that today at 13:00 the monetary policy minutes of the Federal Reserve will be published. Recently, it has been speculated that the Open Market Operations Committee is considering controlling short-term rates in the secondary market through direct interventions, so any discussion of this will be key in the minutes.
On the other hand, the main oil mixtures start the quarter with gains, given data given favorable economic data in China and in the Eurozone.
In Mexico, the T-MEC comes into effect today, which has the potential to generate greater economic growth for the country, derived from the growth of Foreign Direct Investment (FDI) and job creation. However, for this year, for this year, FDI is expected to drop an annual rate of 45% due to the Covid-19 crisis. For the following years, the outlook remains uncertain due to the recovery rate of the global economy and confidence in Mexico.
During the session, an exchange rate is expected, trading between 22.75 and 23.00 pesos per dollar. The euro begins the session with a depreciation of 0.15%, trading at $ 1.1217 per euro, while the pound appreciated 0.06% and is trading at $ 1.2409 per pound.
Money and debt market
In the United States, the yield on 10-year Treasury bonds increased by 2.6 basis points, at a rate of 0.68%, while in Mexico the yield on 10-year M bonds decreased 1.5 basis points, to 5.83 percent.
The peso and the 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 1.91% 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 23.0346 at 1 month, 23.4519 at 6 months and 23.9201 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.
Banco BASE
