The peso closed the week with an appreciation of 3.57% or 87.7 cents, trading around 23.70 pesos per dollar, hitting a low of 23.5529 pesos, a level not seen since April 15.

The Mexican peso was the currency most appreciated in the basket of major crosses and among the currencies of emerging economies, followed by the South African rand, which appreciated 2.43% and the Australian dollar, which appreciated 1.76 percent.

This was due to the fact that, for most of the week, a greater appetite for risk was observed in global financial markets, which allowed for gains in capital markets in Asian countries and in the United States.

During the week, the S&P 500 registered an advance of 3.50%, while, in Mexico, the IPC of the Mexican Stock Exchange advanced 3.16%. Finally, in the raw materials market, the price of WTI oil advanced 24.42% to $ 24.6 per barrel, its highest weekly advance since the beginning of April.

The peso and its trend

The increased risk appetite was due to the following factors:

Speculation about a possible escalation of trade tensions between China and the United States was reduced, after last weekend Donald Trump accused China of concealing relevant information about the coronavirus and questioned the continuity of the «phase one» trade agreement. signed in January. Market optimism was highest in the last session of the week, after negotiators from China and the United States held a telephone conversation, where there were commitments to continue working on the objectives of the trade agreement.

Markets remained optimistic about the process of economic reopening in the United States, after California, the largest state economy in that country, established rules for the reopening of companies starting this week.

Futures and industry

In the Chicago futures market, net speculative positions awaiting an appreciation of the peso showed a decrease from 1,372 contracts to 7,109 contracts, in the week from April 29 to May 5.

However, the decrease was moderate and occurred after an increase of 7,241 contracts in the prior week, indicating greater stability in the futures market.

This also indicates that speculation against the peso has been reduced and that market participants are waiting for more clarity on economic and interest rate expectations.

Several economic indicators were published during the week, reflecting the size of the economic impact of the coronavirus during April.

In the United States, the destruction of 20.5 million jobs during the month was confirmed, while in Mexico a severe drop in air traffic and, therefore, in tourism was confirmed.

Likewise, it was observed that the stoppages of the automotive industry caused automotive production to drop 98.6% monthly in April.

Because these indicators were already expected, their publication did not have an observable effect on the exchange rate.

Other currencies

During the week, the exchange rate touched a minimum of 23.5529 pesos and a maximum of 24.8881 pesos. The euro-peso reached a minimum of 25.5624 and a maximum of 27.2660 pesos per euro in the interbank prices for sale. For its part, the euro touched a minimum of 1.0767 and a maximum of 1.0986 dollars per euro.

At the close, the interbank quotations for sale were 23.6980 pesos per dollar, 1.2406 dollars per pound and 1.0835 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE