The peso closed the session with a moderate depreciation of 0.15% or 3.3 cents, trading around 21.97 pesos per dollar, observing a lateral behavior for the second consecutive day.

The peso slowed its appreciation from previous days in anticipation of the economic growth figure for the second quarter, which will be published tomorrow at 6:00 a.m. for Mexico and at 7:30 a.m. for the United States.

Banco BASE anticipates that Mexico’s GDP will have contracted 16.6% quarterly and 18.3% annually.

In the United States, an annualized quarterly contraction of 37.3% is anticipated, which, for comparison purposes with Mexico, would be equivalent to a quarterly contraction of 11.0 percent.

Although the data is already expected to be negative, a greater contraction than anticipated in either of the two countries could increase the perception of risk in the financial markets, increasing the volatility of the exchange rate.

In the session, the exchange rate stopped its decline at the level of 21.85 pesos, a level that the market considered attractive to liquidate the positions in favor of the peso and / or to take hedges in case it had reached a floor, in view of the relevant data to be published tomorrow.

The peso and the Fed

During the session, the Federal Reserve (Fed) announced the decision to keep its interest rate unchanged in a range of 0.00-0.25% and indicated the plan to keep it at that level until the economy shows a recovery that allows it to move towards maximum employment targets and annual inflation of 2 percent.

In his statement, he reiterated his commitment to use all his tools to support the United States economy.

To support the flow of credit to households and businesses, the Fed will increase, at least at the current rate, its holdings of Treasury securities and mortgage-backed securities in the coming months.

Likewise, one-day and term repurchase operations will continue to be offered.

On the other hand, the Fed announced the extension of its Temporary Liquidity Exchange Lines (FIMA) program for a further 6 months, until March 31, 2021.

Through the program, swap lines are offered for up to 60 billion dollars, with 9 central banks around the world (Australia, Brazil, Korea, Mexico, Singapore, Sweden, Denmark, Norway and New Zealand). The exchange rate remained stable after the announcement, showing a minimal appreciation.

Other currencies

In the exchange market, most currencies gained ground due to the accommodative position of the Federal Reserve, with the Norwegian krone showing an advance of 0.88%, the Danish krone with 0.54%, the euro with 0.53% and the Swiss franc with 0.51 %. In contrast, the Brazilian real depreciated 0.37%, the South African rand 0.18% and the Mexican peso 0.15 percent.

Indicators of Banxico

In the session, the peso-dollar reached a minimum of 21.8502 and a maximum of 22.0442 pesos per dollar in the interbank prices for sale. For its part, the euro touched a minimum of 1.1714 and a maximum of $ 1.1806 per euro. Finally, the euro peso touched a minimum of 25.6110 and a maximum of 25.9484 pesos per euro.

At the close, the interbank quotations for sale were 21.9705 pesos per dollar, 1.2987 dollars per pound and 1.1780 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE