The peso begins the session with an appreciation of 0.47% or 9.4 cents, trading around 19.87 pesos per dollar, as the weakness of the dollar continues for the third consecutive day, with the weighted index falling 0.33% and reaching a new low from 23 April 2018.

The exchange rate reached a minimum in the morning of 19.8616 pesos, a level not seen since March 6.

The weakness of the dollar is mainly due to the renewal of expectations that new fiscal stimuli will be approved in the United States.

Yesterday, Democratic leaders Nancy Pelosi and Chuck Shumer indicated that the bipartisan offer of $ 908 billion is a good basis to begin negotiations.

For his part, Joe Biden supported the proposal, noting that any stimulus package that Congress passes now will be a «down payment» of what he will propose when he begins his administration.

Going forward, the dollar could continue to weaken, especially if expectations about a looser fiscal policy in the United States continue.

It should be remembered that the dollar is also facing downward pressure, due to the broadly accommodative monetary policy of the Federal Reserve, which is expected to keep the interest rate close to 0% at least until 2023.

In the foreign exchange market, the most appreciated currency is the Hungarian forint with 0.98%, followed by the Brazilian real with 0.61% and the Colombian peso with 0.68 percent.

The Mexican peso ranks as the eighth most appreciated currency, while the euro ranks as the twelfth fastest growing currency, appreciating 0.34% and reaching a maximum of $ 1.2161 per euro, a level not seen since April 26, 2018.

The peso and vaccine

Optimism is more limited in the capital markets, where the main indices in Europe show moderate losses, on average close to 0.15%, while in the United States the futures market points to a session with little change.

It should be noted that the market has stopped reacting to negative news related to Covid-19, probably as a consequence of the vaccines that are expected to be available in the following weeks in some countries. However, the advance of Covid-19 continues to pose a threat to economic activity at the end of 2020.

Daily deaths reached a new record in the United States, after 3,157 deaths were recorded in the last 24 hours.

In addition, 200,070 new infections were reported, approaching the previous high of 205,557 cases.

Los Angeles Mayor Eric Garcetti issued an order for citizens to stay home, as they are close to experiencing a “devastating tipping point” in the fight against Covid-19.

Under the new restrictions, all private and public gatherings are prohibited, only people working in essential activities will be able to commute to work.

In Germany, Chancellor Angela Merkel, extended the partial shutdown of its economy for three more weeks. She also indicated that cinemas, bars and gyms must remain closed until January 10.

Laboral sector

Regarding economic indicators, in the United States the Government Office said that the states have provided inconsistent data to the Department of Labor, for which it warned that the data of the initial applications could be distorted.

Indicators of Banxico

In the week ended November 28, 712 thousand new applications for unemployment support were reported, decreasing by 75 thousand units compared to the previous week, after having increased for two consecutive weeks.

On the other hand, continuous applications for unemployment support, from those people who are already receiving support or continue to wait, decreased from 6.089 million to 5.52 billion.

During the session, the exchange rate is expected to trade between 19.80 and 20.02 pesos per dollar. The euro starts the session with an appreciation of 0.31%, trading at 1.2153 dollars per euro, while the pound shows an appreciation of 0.74% and is trading at 1.3464 dollars per pound.

Money market and debt

Yields on 10-year Treasury bonds in the United States and 10-year M bonds in Mexico remain unchanged, at rates of 0.93% and 5.78%, respectively.

Derivatives market

To hedge against a depreciation of the peso beyond 20.00 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 1.91% 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 19.9280 at 1 month, 20.2594 at 6 months and 20.6853 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE