The peso starts the session with a depreciation of 0.50% or 10.0 cents, with the exchange rate trading close to 20.07 pesos per dollar, touching a minimum of 19.9390 and a maximum of 20.1239 pesos.

The peso depreciates after the publication of inflation in the United States that was published a few minutes ago at a year-on-year rate of 4.2% during April, above the market’s expectation of 3.6 percent.

Thus, annual inflation was at its highest level since September 2008.

In its monthly comparison, inflation was 0.8%, after having increased 0.6% in March.

For its part, core inflation, which serves as a better indicator of the long-term trend of inflation, stood at an annual rate of 3.0 percent.

In its monthly comparison, the underlying component advanced 0.9%, after the 0.3% increase observed in March. In the interior, the greatest increase was observed in the prices of used cars, advancing 10% per month.

Likewise, in the bond market, the yield rate of the 10-year Treasury bonds also had an upward movement after the inflation data was published, increasing 2.2 basis points, at a rate of 1.64 percent.

The peso

The performance of the interest rate does not only depend on the inflation data in the United States.

Today the Vice President of the Federal Reserve, Richard Clarida, will give a lecture on economics and monetary policy at 8:00 am.

Later, the president of the Atlanta Fed, Raphael Bolstic and the president of the Philadelphia Fed, Patrick Harker, will also have public comments at 1:00 p.m. and 1:30 p.m., respectively, where they will probably give their opinion on the data of Latest inflation and its implications for monetary policy.

In the commodities market, the price of major oil blends starts the session with gains after the International Energy Agency said excess oil has disappeared, while the closure of a key U.S. pipeline is leading to gas stations from Florida to Virginia to present shortages.

Given this, the WTI starts the session trading at 66.22 dollars per barrel, which is equivalent to an increase in its price of 1.44 percent.

Mexican industry

Regarding economic indicators, this morning the monthly industrial activity indicator for March was published in Mexico, showing a monthly growth of 0.72%, being the highest monthly growth since November 2020 according to seasonally adjusted figures.

In the interior, this monthly growth was explained by the reactivation of the services sector, since the component of generation, transmission and distribution of electrical energy, supply of water and gas through pipelines to the final consumer (utilities), grew 4.89% monthly, after falling for two consecutive months.

Likewise, the manufacturing component showed a monthly growth of 3.03% during the month, after falling during January and February, thanks in part to the transportation equipment manufacturing subcomponent, which grew at a monthly rate of 10.90 percent.

It should be remembered that the manufacture of transport equipment had fallen 3.75% in January and 9.51% in February, so that the growth in March is a recovery effect when the production of this subsector resumes. If a comparison of the March figures is made with December 2020, the manufacture of transportation equipment has not fully recovered, showing a contraction of 3.41 percent.

Finally, mining and construction showed monthly contractions of 3.08% and 0.09% respectively, after being the sectors responsible for the positive

Manufacturing

At an annual rate, industrial activity showed a growth of 1.46%, the first positive figure after falling for 29 consecutive months, that is, since October 2018.

The growth is due to the relatively accelerated recovery of industrial activity between June and November 2020, but also to a base comparison effect since in March of last year, industrial activity contracted at a monthly rate of 3.80%, already which was the month in which the closures of some plants began at the beginning of the pandemic.

It should be noted that, in March 2020, the manufacture of transportation equipment showed a monthly contraction of 22.72 percent.

For this reason, within the industrial activity, only the manufacturing sector shows a positive annual growth of 5.51% in March, highlighting the manufacture of transport equipment with an annual growth of 15.78 percent.

For its part, mining contracted 2.11% annually, utilities fell 3.14% annually and construction contracted 5.65% annually, the latter accumulating 26 consecutive months of annual falls.

During the session, the exchange rate is expected to trade between 20.06 and 20.22 pesos per dollar.

The euro starts the session with a depreciation of 0.39%, trading at 1.2101 dollars per euro, while the pound loses 0.23% and is trading at 1.4110 dollars per pound.

Money market and peso

In the United States, the yield on 10-year Treasury bonds increases by 2.2 basis points, to 1.64%, while in Mexico the yield on 10-year M bonds increases by 2.1 basis points, at a rate of 6.91 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 1.09% 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 20.0154 at 1 month, 20.3746 at 6 months and 20.8345 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE