The peso begins the session with an appreciation of 1.05% or 25.5 cents, trading around 24.12 pesos per dollar, in a recovery of most currencies against the dollar in anticipation of a conference by Fed President Jerome Powell scheduled for today at 8:00 am, where he is expected to comment on the possibility of adopting negative interest rates.

Market attention remains on what Powell can say, because although several Fed officials have ruled out the possibility of negative interest rates, Donald Trump yesterday tweeted that the United States should also accept the «gift» of negative rates.

It should be remembered that the monetary policy of the Federal Reserve is independent of the government of that country.

In the basket of the main crosses against the dollar, the only currency that loses ground is the New Zealand dollar, which depreciated 0.44%, after the Central Bank of New Zealand announced an expansion to its bond purchase program and mentioned that rates Negative interest rates may be an option in the future and discussions are already under way with financial institutions in preparation for this.

Nervousness is not observed in the financial markets of the United States, where the futures market points to a positive opening of the capital market.

The market could register gains if Jerome Powell indicates the possibility of greater monetary stimuli in the short term. However, Powell is likely to be inclined to point out that it is a priority for the government to continue implementing an expansive fiscal policy. The next monetary policy announcement in the United States is scheduled for June 10.

The peso and the oil market

On the other hand, oil prices may be a key determinant of the exchange rate during the session, as weekly statistics on the United States oil market will be published today.

Evidence of a gradual recovery in demand could generate upward pressure on the WTI price, which starts with little change, trading around $ 25.73 per barrel.

This morning in a joint statement by the Saudi energy minister and his counterpart in Russia, they reiterated their commitment to balance the oil market and stressed that there is an increase in demand for oil and less worries about storage capacity globally. .

The peso and other currencies

As for economic indicators, today it was published in the United Kingdom that the economy contracted 5.8% monthly in March, when a monthly contraction of industrial activity of 4.2% and a fall in construction of 5.9 percent were observed.

With this, during the first quarter the economy showed a quarterly contraction of 2% and an annual contraction of 1.6%, below an expected drop of 2.2%. The pound sterling shows an appreciation of 0.52%, trading at $ 1.2324 per pound.

During the session, an exchange rate is expected, trading between 23.50 and 24.50 pesos per dollar. The euro begins the session with an appreciation of 0.25%, trading at $ 1.0875 per euro.

Money and debt market

In the debt market, the yield on United States 10-year Treasury bonds decreases 1.3 basis points, at a rate of 0.65%, while the yield on 10-year M bonds in Mexico remains unchanged, at 5.98 percent.

Derivatives market

To hedge against a depreciation of the peso beyond 25 pesos per dollar, a call option, with an exercise date within 1 month, has a 1.95% premium and represents the right but not the obligation to buy dollars in the level mentioned above.

On the other hand, the interbank forward for sale is at 24.2126 at 1 month, 24.6717 at 6 months and 25.1380 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE