The peso starts the session with an appreciation of 0.50% or 10.39 cents, trading around 20.48 pesos per dollar, with the exchange rate touching a minimum of 20.4743 and a maximum of 20.6354 pesos.

This is the second consecutive session in which the peso shows an appreciation.

However, yesterday it occurred as a contagion effect due to the appreciation of the Brazilian real, while today it is the consequence of a weakening of the US dollar.

The dollar weighted index fell 0.11%, after two consecutive days of advances.

In the wide basket of main crosses, most currencies are gaining ground, with the Mexican peso ranking as the fifth most appreciated currency, after the South African rand (+ 0.95%), the Chilean peso (+ 0.94%), the Russian ruble (+ 0.71%) and the Turkish lira (+0.66 percent).

The peso

The weakening of the dollar was supported by the publication of employment data lower than expected by the market. This morning, the Automatic Data Processing (ADP) employment survey was published in the United States, which estimated that 517 thousand job positions were created during March, below the market’s expectation of 550 thousand jobs.

Although this survey shows an approximation to employment data, the market’s attention will be on the report to be published by the Department of Labor Statistics on Friday, which is expected to show the creation of at least 638 thousand job positions.

Should the employment data be better than expected, an increase in Treasury bond yields could be observed, as the Federal Reserve has emphasized the importance of a more accelerated recovery in the labor market.

Infrastructure plan

In the bond market, the 10-year Treasury bond yield rate stands at 1.71%, after yesterday hitting a maximum of 1.7742%, a level not seen since January 22, 2020.

In the afternoon, the presentation of Joe Biden’s infrastructure plan will be relevant, which is expected to be close to 3 billion dollars.

According to Biden, the package will be paid for with taxes, so the president of the United States is expected to increase the corporate tax to 28%, which had been cut by Trump to 21 percent.

Petroleum

In the commodities market, the price of oil starts the session on Wednesday with losses.

The downward pressure on the price of oil continues to be related to the nervousness around demand due to the increase in coronavirus infections globally.

In France, President Emmanuel Macron will report on new lockdown measures, which could include school closings and travel restrictions.

Given this context and awaiting the OPEC + board, the WTI starts the session trading at 60.40 dollars per barrel, which is equivalent to a reduction in its price of 0.25 percent.

Pemex and the peso

In Mexico, yesterday afternoon, President López Obrador gave his first quarterly report for 2021, in which he pointed out that Pemex will always have the support of the nation.

The president remarked that the contracts for oil exploitation granted in the previous administration will be maintained, but no new concessions will be granted.

On the other hand, it is expected that today the Ministry of Finance and Public Credit will release the Precriteria of Economic Policy 2022, where they will update their expectations of economic growth.

It should be added that, for the Mexican economy to recover from the fall of 2020, GDP would have to grow 9.3% in 2021.

During the session, the exchange rate is expected to trade between 20.42 and 20.70 pesos per dollar. The euro starts the session with an appreciation of 0.09%, trading at 1.1727 dollars per euro, while the pound advances 0.21% and is trading at 1.3767 dollars per pound.

Money market and debt

In the United States, the yield on the 10-year Treasury bonds increased by 1.8 basis points, at a rate of 1.72%, while in Mexico the yield on the 10-year M bonds remained unchanged, at 6.91 percent.

Derivatives market

To hedge against a depreciation of the peso beyond 21 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 1.62% 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 20.5461 at 1 month, 20.9007 at 6 months and 21.3824 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE