The peso began the session with an appreciation of 0.12% or 2.4 cents, trading around 20.23 pesos per dollar, with the exchange rate touching a minimum of 20.1922 and a maximum of 20.2971 pesos per dollar, ranking for the fourth consecutive session in a channel stable between the levels of 20.20 and 20.30 pesos per dollar.

The foregoing is due to the fact that there are signs of an upward movement for the exchange rate and market participants are waiting for relevant economic information to be published in the Friday session that allows them to have additional information to evaluate the future of the policy monetary in the United States and Mexico.

It should be remembered that tomorrow at 6:00 am the inflation for April is published in Mexico, while at 7:30 am the non-agricultural payroll of the United States is published, where the creation of about a million job positions, which would be the largest increase since August 2020 when 1.58 million jobs were created due to a rebound effect.

The peso

The moderate appreciation of the peso this morning is a direct result of a 0.24% weakening of the dollar according to the weighted index, after yesterday afternoon several Federal Reserve officials reiterated that inflationary pressures are temporary, reducing speculation on probable increases in the interest rate in the coming months.

According to the vice president of the Federal Reserve, Richard Clarida, the information indicates that inflation will move upwards with the economic reopening, but these pressures will not be persistent.

For his part, the president of the Chicago Fed told a conference that the risk of out-of-control inflation is remote and Fed Governor Michelle Bowman said the risk of inflation persisting for above 2% is still low.

Petroleum

In the foreign exchange market, most currencies are gaining ground against the dollar and in other financial markets it stands out that the main European indices show an average decline of 0.26 percent.

On the other hand, in the raw materials market, energy prices fell, with the WTI losing 0.64%, while corn hit a new annual maximum of $ 7.22 per bushel, a price not seen since March 28, 2013 .

Upward pressures continue as droughts in Brazil fuel concerns that global supplies will be running out.

Brazil is the second largest corn exporter in the world and no rains are expected in the growing areas for at least 15 days, putting the second harvest of the grain at risk.

Given this, corn is trading at around $ 7.13 per bushel, which is equivalent to a 0.74% increase in its price.

Tomorrow the inflation in Mexico will be published, where it is estimated that the monthly inflation for April will be at a rate of 0.27% and the annual inflation of 6.03%. It is worth mentioning that the estimated monthly inflation would be the highest for an equal month since April 2009.

Taking this estimate into account, it can be said that about 45% of the increase in annual inflation so far this year is due to the low base of comparison and 55% of the increase is the result of inflationary pressures in the first fortnights of the year. anus.

The recent increases in the price of corn and the evidence of an economic reactivation since March and in the second quarter, increase the probability that inflationary pressures will continue to be observed in the year.

British economy

Regarding relevant news, this morning, the Bank of England announced a decrease in the rate of purchase of bonds, going from 4.4 to 3.4 billion pounds sterling per week, due to an improvement in the expectations of economic growth with the progress of the vaccination program. The rate was unchanged at 0.1 percent.

The total amount to which the bond purchase program can amount remained unchanged at 895 billion pounds, although the possibility of ending the program between the months of August and December this year is being discussed.

Likewise, the Bank of England raised its economic growth expectation for 2021 from 5.0% to 7.25%, adding that the economy will reach pre-pandemic levels in the fourth quarter of 2021.

The Bank of England’s decision to begin slowing down the bond purchase rate is in addition to the Bank of Canada‘s decision that decreased the bond purchase rate as of the week of April 26.

This sends a signal to the market that central banks around the world may adopt a less flexible monetary stance in the coming months, including the Federal Reserve, which has not yet sent any signals that this could happen in the year.

The British pound starts the session with little change, depreciating 0.05% and trading at 1.3898 dollars per pound.

Other currencies and the peso

Regarding the monetary policy of emerging economies, yesterday afternoon the Central Bank of Brazil announced an increase in the interest rate from 75 basis points to 3.50 percent.

This rate had already been adjusted up once on March 17, also by 75 basis points from 2.00 to 2.75 percent.

The Brazilian real shows a moderate depreciation of 0.10% this morning.

Regarding economic indicators, in the United States the weekly employment report showed that initial applications for unemployment support decreased by 92 thousand compared to the previous week, reaching 498 thousand units, while the market expected a decrease of 15 thousand .

This is the first time that initial applications have fallen below the 500,000 mark since the pandemic began.

On the other hand, the continuous applications for unemployment support, of those people who already received support or who continue to wait increased from 3.65 to 3.69 million.

During the session, the exchange rate is expected to trade between 20.16 and 20.36 pesos per dollar.

The euro starts the session with an appreciation of 0.41%, trading at 1.2054 dollars per euro, while the pound loses 0.02% and is trading at 1.3902 dollars per pound.

Money market and debt

In the United States, the yield on the 10-year Treasury bonds increases by 1.6 basis points, to 1.58%, while in Mexico the yield on the 10-year M bonds decreases by 0.8 basis points, at a rate of 6.865 percent .

Derivatives market and the peso

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 1.67% 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 20.3041 at 1 month, 20.6574 at 6 months and 21.1165 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE