The peso starts the session with little change compared to yesterday’s close, showing a 0.19% depreciation, trading around 20.08 pesos per dollar, with the exchange rate touching a minimum of 20.0195 and a maximum of 20.1379 pesos.

In the foreign exchange market, a strong dollar is observed, with the US currency advancing 0.25% according to the weighted index, its largest daily increase since March 30, with most currencies showing a depreciation, particularly country currencies. oil producers or emerging economies.

The peso

The South African rand lost 0.64%, the Russian ruble 0.63%, the Swedish krona 0.56%, the Norwegian krone 0.55% and the Turkish lira 0.53%.

This is mainly due to the following factors:

First factor

The perception of risk has risen globally after the publication of unfavorable growth data in Europe.

In the first quarter, the Eurozone was affected by a third wave of infections, which caused new confinements, thus slowing the economic recovery of the area and leading it to register a second technical recession.

Thus, the Eurozone showed a quarterly contraction of 0.6%, after having contracted 0.7% in the fourth quarter of 2021.

In annual terms, the Eurozone shows a contraction of 1.8 percent.

Of the countries that have already published their GDP figures, Portugal is the one that shows the deepest quarterly fall of 3.3%, followed by Latvia with a quarterly contraction of 2.6% and Germany with a decline of 1.7 percent.

On the other hand, the highest growth rates were observed in Lithuania (+ 1.8%) and Sweden (1.1 percent).

France also managed to register a quarterly growth of 0.4%. Going forward, a rebound is anticipated for the second quarter, driven by progress in the vaccination campaign.

Second factor

Downward corrections are observed in the raw materials market, mainly among energy prices.

The WTI shows a decline of 2.03%, while the Brent loses 1.66 percent.

Mexican economy

It is important to note that this morning the timely estimate of economic growth for Mexico corresponding to the first quarter was published, a fact that did not have an observable effect on the exchange rate.

During the first quarter, Mexico‘s GDP grew 0.44% quarterly according to seasonally adjusted figures, being the lowest quarterly growth rate since the second quarter of 2020.

This quarterly growth is equivalent to an annual contraction of 2.93%, thus accumulating six consecutive quarters of annual contractions, being the longest period in recording of falls together with the period from the third quarter of 1982 to the fourth quarter of 1983.

Taking into account the timely growth figure in original figures that shows an annual contraction of 3.8%, the GDP for the first quarter is 8.69% below the maximum reached in the fourth quarter of 2018, before a moderate fall began to be observed. of economic activity in 2019 and a severe drop in 2020.

By economic activity group, primary activities showed a quarterly contraction of 1.27%, being the second consecutive quarterly contraction after falling 2.39% in the fourth quarter of 2020.

At an annual rate, a growth of 2.80% was observed, it should be remembered that the sector was not severely affected by the pandemic in 2020.

Industry and peso

Secondary activities (industrial activity) showed stagnation, growing 0.0% quarterly, being the lowest growth rate since the second quarter of 2020, when the economic activity group contracted 23.13 percent.

The foregoing is the result of a contraction in manufacturing and mainly in the production of the automotive sector, which was offset by the growth of the construction sector.

The details of these sectors will be available until May 26.

At an annual rate, secondary activities contracted 2.30%, accumulating ten consecutive quarters of annual falls, being the longest period on record. In 2008 and 2009, the annual contractions in industrial activity had an extension of seven quarters.

Due to a rebound effect, the annual rate is expected to show significant growth in this group of economic activity in the second quarter.

Services

Finally, tertiary activities, which include commerce and the rest of the services sector, showed a quarterly growth of 0.72%, the lowest since the second quarter, but the highest among the three groups of economic activity.

It should be noted that, according to other publications, the services sector showed monthly contractions during January and February, mainly due to the impact of the pandemic at the beginning of the year.

However, as of March a reactivation of the sector was observed that was also driven by the Easter holidays.

In summary, it can be said that the quarterly GDP growth of 0.44% is largely due to the reactivation of the services sector as of March, especially in sectors that were strongly affected in 2020, such as recreational activities, hotels and restaurants.

At an annual rate, tertiary activities contracted 3.56%, accumulating six consecutive quarters of falls, being the longest period on record from the first quarter of 1986 to the first quarter of 1987, when it contracted at an annual rate for five consecutive quarters.

With the publication of the GDP for the first quarter, Grupo Financiero BASE maintains its growth expectation for 2021 at 4.6% unchanged.

Income, peso and savings

Regarding other economic indicators, in the United States the Personal Income and Consumption report for March was published.

Personal income increased at a monthly rate of 21.1%, before the distribution of the third round of direct checks. The savings rate stood at 27.6% in March, remaining well above the pre-pandemic level (February 2020) of 8.3 percent.

Personal consumption increased at a monthly rate of 4.2%, after having decreased the previous month.

During March, consumption was boosted by fiscal stimuli and progress in the vaccination campaign, which has allowed consumers to regain confidence.

During the session, the exchange rate is expected to trade between 19.97 and 20.15 pesos per dollar.

The euro starts the session with a depreciation of 0.30%, trading at 1.2085 dollars per euro, while the pound loses 0.28% and is trading at 1.3905 dollars per pound.

Money market and debt

In the United States, the yield on 10-year Treasury bonds increases 0.6 basis points, to 1.64%, while in Mexico the yield on 10-year M bonds increases 1.4 basis points, at a rate of 6.88 percent .

Derivatives market

To hedge against a depreciation of the peso beyond 20.50 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 1.42% 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 20.1243 at 1 month, 20.4825 at 6 months and 20.9504 units of peso per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE