The peso begins the session with an appreciation of 1.13% or 27.9 cents, trading around 24.42 pesos per dollar, gaining ground for the second consecutive session.

The appreciation of the peso is the result of a weakening of the US dollar overnight, causing the dollar’s weighted index to lose 0.58%, its biggest daily drop since April 9.

It should be noted that the fall of the dollar occurred at the same time that a shock was observed in the commodity market, particularly in the price of oil.

During the overnight, the price of the WTI in its June delivery contract shows a 12.60% drop, hitting a low of $ 10.07 per barrel, after several funds began to undo their investment positions.

This increased demand for contracts maturing in July, which began the session with an advance of 1.22%, trading at $ 18.30 per barrel, hitting an overnight high of $ 19.66.

For its part, Brent begins the session with few changes compared to the close of Monday, trading around $ 20 per barrel.

During the overnight, the currencies that advanced the most were those of countries that produce raw materials, moving in tandem with the price of oil in their July delivery contract.

The peso and the COVID-19

On the other hand, in the financial markets, especially in the capital market, optimism continues for the plans of the main economies in Europe and the United States to start the economic reopening, as the number of new cases and deaths from the coronavirus.

In Europe, the main indexes advance by 1.7% on average, while in the United States the futures market points to gains of close to 1.5 percent.

Regarding economic indicators, this morning the merchandise trade balance for March was published in Mexico, which showed a surplus of 1,914 million dollars in March and a cumulative surplus of 5,332 million dollars in the first quarter, the highest accumulated quarterly in registration since 1993.

This was mainly due to the fact that imports fell at a higher rate than exports, showing a monthly contraction of 5.18% and an annual contraction of 9.75 percent.

External sales

For their part, exports showed a monthly decrease of 3.87% and an annual contraction of 4.70%, the biggest annual fall since June 2016.

Inland, oil exports contracted 47.93% annually, their biggest drop since December 2015, and non-oil exports fell 1.66% annually. Automotive exports stand out from non-oil exports, which showed an annual contraction of 7.16%, the largest since 2016.

During the session, an exchange rate is expected, trading between 24.00 and 25.00 pesos per dollar. The euro begins the session with an appreciation of 0.48%, trading at $ 1.0881 per euro, while the pound gains 0.57% and is trading at $ 1.2502 per pound.

Money market

In the money market, the yield on 10-year Treasury bonds decreases 2.1 basis points to 0.64%, while in Mexico the yield on 10-year M bonds remains unchanged at a rate of 6.94 per hundred.

The peso and the derivatives market

To cover a depreciation of the peso beyond 26 pesos per dollar, a call option, with an exercise date within 1 month has a premium of 1.46% 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 24.5638 at 1 month, 25.0774 at 6 months and 25.5959 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE