The peso begins the session with an appreciation of 0.40% or 8.2 cents, trading around 20.31 pesos per dollar, with the exchange rate touching a minimum of 20.2911 and a maximum of 20.4233 pesos per dollar.

This is due to the fact that the US dollar slowed its appreciation, with the dollar weighted index losing 0.12 percent.

Among the major crossovers, the performance of currencies is mixed, evidence that market participants have been waiting for the release of relevant economic indicators.

In the United States, the monthly employment report showed the creation of 49,000 job positions during January, below the market’s expectation of 100,000 jobs.

Also, the unemployment rate stood at 6.3%, decreasing from 6.7% in December. If underemployed people are taken into account, the rate rises to 11.1 percent.

Within the non-farm payroll, temporary unemployment decreased by 293,000 to 2.7 million, while permanent unemployment increased by 133,000 to 3.5 million.

The peso and international trade

On the other hand, the December trade balance showed a deficit of 66.6 billion dollars (million dollars), decreasing at a monthly rate of 3.5%. In 2020 the accumulated deficit was 678.7 billion, increasing by 17.7% compared to 2019 and being the largest deficit since 2008.

In the last month of the year, total exports grew at a monthly rate of 3.4%, while imports increased at a monthly rate of 1.5 percent.

With the accumulated figures to the last month of 2020, the main commercial partner of the United States is China, representing 14.9% of international trade, followed by Mexico (14.3%) and Canada (14.0 percent).

Tax incentives

The Senate has already approved the budget resolution proposal, with a 51-50 vote counting the vote of Vice President Kamala Harris.

This raises the probability that the $ 1.9 trillion fiscal stimulus package will be approved with a simple majority, without the need for a bipartisan agreement.

Another factor that could raise optimism is that the Food and Drug Administration (FDA for its acronym in English) indicated that it will discuss the approval of the use of the vaccine developed by Johnson & Johnson, in a meeting scheduled on February 26.

The main advantage of this vaccine is that it only needs the application of one dose, which would speed up the vaccination process.

Moderate gains are observed in the capital market, with the main European indices advancing on average close to 0.50%, while in the United States the futures market shows that the main indices could start the session with gains close to 0.40%, reaching new all-time highs.

In the commodity market, the price of oil continues to rise, as global supply continues to decline and the prospects for demand improve with the vaccination process.

Overnight WTI reached a high of $ 57.09 per barrel not seen since January 22, 2020.

Consumption

For its part, in Mexico, private consumption recovered strength during November with a monthly growth of 2.95% (Vs. + 1.30%), adding six months in recovery.

With this, consumption is 6.56% below the levels observed in November 2019, spinning 12 months of contractions.

Private consumption was driven by the monthly advance in the consumption of imported goods of 20.44% (-0.25% annually), representing the third largest increase on record.

On the other hand, the consumption of goods of national origin showed a slight increase of 0.84% ​​compared to October (-0.90% annually), while the consumption of national services advanced 0.97% monthly (-13.86% annually).

Private consumption registers in the accumulated to the eleventh month of 2020 an average annual contraction of 11.51% and it is estimated that in 2021 it will grow 4.7 percent.

The peso and capital expenditure

Likewise, Gross Fixed Investment registered a monthly increase of 2.3%, after growing 3.0 percent in October.

In annual terms, investment showed a contraction of 11.3%, adding 22 consecutive months of falls.

In the interior, investment was boosted by investment in construction, which presented a monthly advance of 2.4% (-9.9% annually).

On the other hand, investment in machinery and equipment registered a growth at a monthly rate of 2.1% (-14.1% annually.)

As of November, investment presents an average annual contraction of 17.7% and it is estimated that in 2021 it will show a rebound effect with a growth of 11.3 percent.

During the session, the exchange rate is expected to trade between 20.16 and 20.39 pesos per dollar.

The euro starts the session with an appreciation of 0.33%, trading at 1,2003 dollars per euro, while the pound advances 0.31% and trading at 1.3714 dollars per pound.

Money market and debt

In the United States, the 10-year Treasury bond yield increased 0.6 basis points, to 1.15%, while in Mexico the 10-year M bond yield remains unchanged, at a rate of 5.61 percent.

The peso and derivatives market

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 2.05% 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 20.3929 at 1 month, 20.7427 at 6 months and 21.1561 pesos per dollar at one year.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE