The Mexican peso closed the session with an appreciation of 0.21% or 4.1 cents, trading around 19.87 pesos per dollar, touching a minimum of 19.8196 pesos.

The appreciation of the peso was matched by most currencies, after the Federal Reserve maintained accommodative language in its monetary policy announcement.

It is worth mentioning that the appreciation of the peso was not distinguished from other currencies, as it was the twelfth most appreciated currency. The dollar weighted index closed 0.10% lower, losing ground for the third consecutive session.

In its statement, the Fed announced that the interest rate remains unchanged in a range of 0.00-0.25%. He mentioned that he hopes to keep the rate at this level until labor market conditions have reached levels consistent with maximum employment and inflation rises above 2% for a period of time, to average the 2 percent target.

In addition, the Fed will continue to increase its holdings of Treasury securities by at least $ 80 billion per month and mortgage-backed securities by $ 40 billion per month, until substantial progress has been made towards employment and inflation targets.

The peso and GDP

The Federal Open Market Committee (FOMC) adjusted its estimate of real GDP upwards, anticipating a contraction of 2.4% in 2020, from the previous estimate (September) of a contraction of 3.7 percent.

For 2021 the committee foresees a growth of 4.2%. The new contraction estimate of 2.4% for 2020 implies that, during the fourth quarter, the US economy would grow at a quarterly rate of 5.8%, an annualized rate of 25.3% and an annual rate of 2.1 percent.

With this, although GDP shows a fall in 2020, GDP for the fourth quarter would be above the fourth quarter of 2019, the result of an accelerated recovery thanks to fiscal and monetary stimuli in that country. If the economy grows 4.2% in 2021, the real GDP would show a growth of 1.7% compared to the GDP of 2019.

Another factor that contributed to the optimism of the global financial market during the session continues to be the possibility that new fiscal stimuli will be approved in the United States in the short term.

According to the Republican leader of the Senate, Mitch McConnell, negotiations are continuing and he believes that an agreement will be reached. In the United States, the S&P 500 closed the session with a gain of 0.18%, while the Nasdaq index registered an advance of 0.50 percent.

Banxico

On the other hand, Banco de México announced the extension of the term of the swap line established with the Federal Reserve for 60 billion dollars. The mechanism was established on March 19 as a measure to provide liquidity and deal with the instability of financial markets in the face of the Covid-19 pandemic.

Indicators of Banxico

Initially it had been established with an expiration date of March 31, 2021, now it will be in force until September 30, 2021.

In the session, the exchange rate touched a minimum of 19.8196 and a maximum of 19.9984 pesos, the euro touched a minimum of 1.2125 and a maximum of 1.2212 dollars per euro. Finally, the euro peso touched a minimum of 24.1633 and a maximum of 24.3692 pesos per euro.

At the closing, the interbank quotes for sale stood at 19.8740 pesos per dollar, 1.3492 dollars per pound and 1.2185 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE