The peso starts the session with a depreciation of 0.08% or 1.7 cents, trading around 19.97 pesos per dollar, with the exchange rate touching a minimum of 19.9007 and a maximum of 19.9892 pesos.

There is no clear determinant behind the moderate depreciation of the peso and in the foreign exchange market it is observed that the wide basket of main crosses shows a mixed performance against the dollar.

The dollar weighted index starts the session with a 0.01% decline, without showing a definite direction during the overnight.

The foregoing is due in part to the fact that little globally relevant economic information will be released during the session.

In the commodities market, the price of WTI oil began the session with an increase of 1.45%, trading at 64.50 dollars per barrel, in view of the expectation of a growth in demand at a global level and news that an increase has not yet been achieved. understanding on some key points of the Iran nuclear deal, which could delay Iran’s return to the market as an oil exporter.

On the contrary, the prices of industrial metals started to fall, with aluminum falling 1.22% and iron ore losing 5.70%, following news that the Chinese government summoned leaders of the metallurgical sector to a meeting where they he warned of severe penalties for continuing speculation in the market.

Mexican peso

The increase in energy prices and the falls in the prices of industrial metals did not have a clear effect on the foreign exchange market.

The capital market shows a mixed performance, with an upward bias.

In Europe, the main indices show an average decline of 0.08%, while in the United States, the futures market indicates that there will be gains at the opening close to 0.35% in the S&P 500 and 0.65% in the Nasdaq.

Regarding relevant events, today Lael Brainard, governor of the Federal Reserve, will participate in a conference on cryptocurrencies at 8:00 am. In the afternoon, Kansas Fed President Esther George will also make public comments.

Prices

Regarding relevant economic indicators, this morning the inflation for the first fortnight of May was published in Mexico, which stood at a fortnightly rate of -0.01% and an interannual rate of 5.80%, being above expectations and putting in shows inflationary pressures in the short term.

The biweekly inflation of -0.01%, although negative, is the highest for the same fortnight since 2002, omitting the first fortnight of May 2020, when it stood at 0.30% due to price distortions related to the coronavirus pandemic.

Energy and peso

As expected, non-core inflation, which includes the products with the highest price volatility, was negative at a fortnightly rate of 1.00%.

In the interior, energy prices fell 3.72% biweekly, as electricity rates decreased.

The electricity component fell at a biweekly rate of 21.26%, while natural gas remained unchanged and LP gas fell 0.66 percent.

Only fortnightly increases were observed in gasoline prices of high (0.39%) and low octane (0.23 percent).

The energy component was located at an annual rate of 25.62%, largely explained by a low base of comparison effect.

Also within the non-core component, the prices of agricultural products rose 1.20% every two weeks, reaching an annual rate of 3.28 percent.

Within fruits and vegetables, the highest fortnightly increases were observed in the prices of chayote (18.93% fortnightly) and tomato (16.68 percent).

On the other hand, the orange, the serrano pepper and the green tomato showed fortnightly increases greater than 5 percent.

In the rest of the agricultural products, the fortnightly increase in the prices of pork meat (+ 3.55% fortnightly) stood out, followed by chicken (1.39%) and shrimp (1.37 percent).

Electric rates

Finally, the underlying inflation that determines the trajectory of inflation, stood at a biweekly rate of 0.33%, the highest for the same fortnight since 1999.

Therefore, the annual rate rose from 4.13% to 4.22%, its highest level since the second half of February 2018.

It is worth mentioning that annual headline inflation fell to 5.80%, mainly as a result of the reduction in electricity rates, since the underlying component maintains a clear upward trend.

Within core inflation, the merchandise component was 0.42% biweekly and 5.60% annually.

Among the 10 products with the highest price increase within core inflation, plants and flowers stood out (+ 4.05% biweekly), followed by personal care products such as skin creams (+ 2.62%) and lotions and perfumes (+ 2.62 percent).

Likewise, some clothing categories showed fortnightly increases greater than 2%, which indicates a gradual reactivation of the demand for non-basic products.

It should be noted that the price of the tortilla, which is a staple food, rose at a fortnightly rate of 1.45%, accumulating an increase in the year of 7.95 percent.

The services component showed a biweekly inflation of 0.23% and an annual inflation of 2.71 percent.

The services that showed the highest fortnightly increase in their prices were those related to tourism.

Air transport increased 9.23% biweekly, while package tourism services increased 2.63 percent.

Other currencies

Towards the end of the year, Grupo Financiero BASE maintains its expectation of an annual inflation of 5% and upward risks are identified for inflation within the underlying component.

Likewise, the expectation remains that Banco de México will keep the interest rate unchanged at 4.00% for the rest of the year.

During the session, the exchange rate is expected to trade between 19.89 and 20.04 pesos per dollar.

The euro starts the session with an appreciation of 0.25%, trading at 1.2212 dollars per euro, while the pound loses 0.08% and is trading at 1.4138 dollars per pound.

Money market and debt

In the United States, the yield on the 10-year Treasury bonds decreased by 1.2 basis points, to 1.61%, while in Mexico the yield on the 10-year M bonds decreased by 1.0 base point, reaching a rate of 6.85 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 1.23% 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 20.0491 at 1 month, 20.3281 at 6 months and 20.8903 pesos per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE