The Mexican peso closed the week with a depreciation of 0.53% or 10.4 cents, trading around 19.97 pesos per dollar, with the exchange rate touching a minimum of 19.7197 and a maximum of 20.0153 pesos, being the first weekly depreciation after two weeks of appreciation.

Mexican peso

The depreciation of the peso is mainly due to two factors:

First factor

Speculation returned in the week that the Federal Reserve could abandon its broadly flexible monetary stance early.

The first upward movement of the exchange rate in the week occurred on Wednesday, after the publication of the Fed’s monetary policy minutes, where the members of the Committee indicated they agreed to begin discussing the reduction of the purchase program of bonds if employment and inflation continue to move rapidly toward their targets.

They also noted that inflationary pressures in the United States may not be transitory. The second upward movement of the exchange rate occurred on Friday, with the publication of the leading PMI indicators for May. The United States services indicator stood at 70.1 points, its highest level on record.

Second factor

Downward pressures were observed on raw material prices, this related to the expectation of a greater supply of oil and to the warning of the Chinese government to punish speculation with the prices of industrial metals.

For the week, the WTI closed down 2.48%, while natural gas fell 1.79 percent.

For its part, aluminum lost 3.78%, copper 3.40% and nickel 4.29 percent.

Agricultural commodities also lost with soybeans falling 3.89% and wheat 4.88 percent.

All currencies of Latin American economies closed with weekly losses, standing out the Chilean peso (-2.51%), the Peruvian sol (-1.98%), the Brazilian real (-1.47%) and the Colombian peso (-1.11%), all losses higher than those of the Mexican peso (-0.53 percent).

It should be noted that for all these countries, raw material exports exceed 60% of their total exports, while in Mexico, only 12% of exports are raw materials, the rest being manufactured products.

Banxico

In the next sessions it is likely that the perception of risk with respect to Mexico will rise, after the president of Mexico made remarks about Banco de México three days in a row, saying that the Treasury did not receive a remnant of operation corresponding to last year and criticizing at the same time transparency regarding the administration of international reserves.

On Friday morning, the president added that he will not nominate the current governor Alejandro Díaz de León for a second term and that he will instead nominate an economist «in favor of moral economy.»

It should also be remembered that in just over two weeks the federal and local elections will take place on June 6, which could lead to cautionary sessions for the Mexican peso.

Inflation

Next week the publication of inflation corresponding to the first half of May will be relevant, which will be announced on Monday 24 at 6:00 am.

Grupo Financiero estimates a biweekly inflation rate of -0.19%, standing at an annual rate of 5.60 percent.

This is due to the fact that during the first fortnight there are decreases in electricity rates. However, it is considered that there will continue to be upward pressure on other components of inflation.

On the week, the euro hit a low of 1.2126 and a high of $ 1.2245 per euro.

For its part, the euro peso touched a minimum of 24.2212 and a maximum of 24.3602 pesos per euro.

At the close, the interbank quotes for sale stood at 19.9699 pesos per dollar, 1.4151 dollars per pound and 1.2183 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE