The peso begins the session with a depreciation of 0.80% or 19.2 cents, trading around 24.19 pesos per dollar, erasing the advance of the session on Tuesday and losing along with most of the currencies in the basket of major crosses, while the participants of the market are waiting for relevant economic information during the week.
A few moments ago, the destruction of 20,236,000 job positions was announced in the United States during April, according to the ADP survey of employment that is published ahead of official non-farm payroll figures on Friday. The data confirms that the unemployment rate will show a significant increase, probably to levels not seen since the Great Depression.
Market sentiment is not entirely negative, as the capital markets in Asia and Europe show mixed results, while in the United States the futures market indicates an opening with gains close to 1 percent.
This is because last night, Donald Trump reiterated his position to reopen the economy in the short term. Trump’s rhetoric in recent days makes it clear that he is focused on seeing an accelerated economic recovery, due to the November presidential elections.
Any sign that the economy is preparing to open tends to generate positive effects on the capital market.
The peso and indicators
On the other hand, this morning negative economic indicators were published in Mexico. In February, the coincident indicator had a monthly contraction of 1.5 points with respect to the previous month, reaching a level of 108 points, the lowest reading since May 2016.
The indicator continued its downward trend, reaching below the previous peak of 113.9 points, for 21 consecutive months, indicating that the economy is in a recessive phase.
Likewise, the sales of light vehicles during April from AMIA affiliated companies were published, standing at 34,903 units, this is equal to a fall of 60.1% compared to March and 64.5% compared to April 2019.
The above is evidence of the strong impact of the partial closure of the economy at the beginning of the second quarter, which strongly affected the consumption of durable goods.
During the session, an exchange rate is expected, trading between 23.85 and 24.50 pesos per dollar. The euro starts the session with a depreciation of 0.30%, trading at $ 1.0808 per euro, while the pound loses 0.45% and is trading at $ 1.2379 per pound.
Money market
In the money market, the yield on 10-year Treasury bonds increases 4.9 basis points to 0.71%, while in Mexico the yield on 10-year M bonds remains unchanged, at a rate of 6.41 percent.
Derivatives market
To hedge against a depreciation of the peso beyond 25 pesos per dollar, a call option, with an exercise date within 1 month has a premium of 1.89% 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 24.2180 at 1 month, 24.7354 at 6 months and 25.4928 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.
Banco BASE
