The peso begins the session with an appreciation of 0.75% or 16.9 cents, trading around 22.53 pesos per dollar, given an increase in risk appetite in global financial markets, after the non-agricultural payroll in the United States showed the creation of 4.8 million job positions during June, accumulating a recovery of 7.5 million jobs in the last two months after falling 20.68 million in April.

The data was accompanied by a decrease in the unemployment rate from 13.3% to 11.1% and an increase in the labor participation rate from 60.8 to 61.5 percent.

For its part, the initial requests for unemployment support from the previous week stood at 1,427 million, down 55 thousand requests compared to a week ago.

The data shows that the labor market is still far from a full recovery as applications have been above one million for 15 consecutive weeks.

Another factor contributing to this morning’s optimism is the news released yesterday that two pharmaceutical companies were successful in early testing in the development of a coronavirus vaccine.

Going forward, it is likely that the attention of the financial markets will focus again on news about the advance of the pandemic and its effect on economic activity during the summer months, since only on Wednesday, 50 thousand new cases were confirmed in the United States, new maximum of registrations in a day.

The peso and HK

On the other hand, yesterday the United States House of Representatives approved a new bill that imposes sanctions on banks that do business with Chinese officials involved in the repression of protesters in Hong Kong.

Likewise, Speaker of the House of Representatives Nancy Pelosi said that China’s new legislation marks the end of the «one country, two systems» model. Today, the initiative is expected to be approved by the Senate and signed by President Donald Trump. This event has not had a negative impact on the financial markets.

In the capital market, the main indices in Europe show advances on average close to 2%, while, in the United States, the futures market shows that the indices could open with gains close to 1%. For its part, the price of oil registers an increase of 0.73%, standing at 40.11 dollars per barrel.

Exchange rate

In the exchange market, most currencies gain against the dollar, mainly those of emerging economies or of countries that produce raw materials, such as the South African rand with 0.86%, the New Zealand dollar with 0.80%, the Brazilian real with 0.73% and the Norwegian crown, with an advance of 0.50%. The weighted index of the dollar lost 0.23% falling for the third consecutive session and accumulating a decrease of 0.78%.

Regarding economic indicators for Mexico, car sales in Mexico showed a recovery during June, standing at 62,837 units, that is, 20,809 units or 49.51% above the previous month, although still standing 41.1% below sales of the same. month a year ago.

Composite indicators

For its part, during April, the System of Composite Indicators: Compound and Advance (SICCA) revealed a strong contraction for the economy. The coincident indicator stood at 78.50 points, a level not seen since November 1996.

The indicator showed the largest drop on record since the series began in 1980, with a decrease of 25.80%, surpassing the drop observed during the Tequila Crisis in February 1995 of 7.68%. At the fourth month of the year, the indicator accumulates 18 months in a recessive phase (as of November 2018) and 23 months below its last peak (May 2018).

Likewise, the leading index stood at 76.40 points, a level not seen since November 2003. The indicator showed a decrease of 21.07% compared to March, being a historical decrease.

During the session, an exchange rate is expected, trading between 22.35 and 22.70 pesos per dollar. The euro begins the session with an appreciation of 0.29%, trading at $ 1.1284 per euro, while the pound is up 0.30% and is trading at $ 1.2513 per pound.

The peso and the money and debt market

In the United States, the yield on 10-year Treasury bonds increases by 2.6 basis points, at a rate of 0.70%, while in Mexico the yield on 10-year M bonds remains unchanged at 5.74 percent.

Derivatives market

To hedge against a depreciation of the peso beyond 23 pesos per dollar, a call option, with an exercise date within 1 month, has a 2.14% premium 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 22.6661 at 1 month, 23.0747 at 6 months and 23.5312 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE