The peso starts the week with a depreciation of 0.23% or 5.1 cents, trading around 22.49 pesos per dollar, ranking among the few currencies that lose ground. This is due to a greater perception of risk with respect to Mexico relative to other countries.
The peso and variables
Among the factors that cause this movement are the following:
First factor
Yesterday it was announced that Mexico surpassed Italy in the number of deaths from coronavirus, reaching the figure of 36,006, ranking as the fourth country with the highest number of deaths, only behind the United States, Brazil and the United Kingdom.
It should be noted that, as in the United States, Mexico maintains a high rate of new daily cases, despite the fact that the country is in position 40 for the number of tests carried out, which means that it is most likely not registering a large number of cases.
Second factor
In the Chicago futures market, the net speculative positions in favor of the peso were 14,980 contracts, each of 500 thousand pesos, observing a decrease of 5,976 contracts in the week between Wednesday, July 1 and Tuesday, July 7.
This is a sign that the market remains cautious regarding the direction of the exchange rate in the future, which reduces speculation in favor of the Mexican peso.
Third factor
At the beginning of the week, the price of WTI shows a decline of 1.18%, trading at $ 40.07 per barrel, because market participants are waiting for the virtual meeting between OPEC and its allies (OPEC +), the which will take place on Wednesday and the future of the historic agreement is expected to be discussed.
It is speculated that plans may be announced to start reducing production cuts, as knowledgeable sources mention that Russian oil companies are preparing to increase production in the coming months.
Bank indicators
Despite the Mexican peso starting to depreciate, most currencies are gaining ground against the dollar, as markets have turned their attention to the start of the quarterly earnings season in the United States. This week the results of the main banks in that country will be announced, starting with JPMorgan tomorrow Tuesday.
Profits have been observed in the capital market since the Asian session, with Japan’s Nikkei 225 advancing 2.25%. For its part, in Europe most of the main indices show gains of around 1.5%. Finally, the futures market shows that gains of close to 1% could be observed in the United States capital markets.
Indicators of Banxico
As for economic indicators, this week on Wednesday the economic growth of China during the second quarter will be announced, which will probably be at 2% annually and close to 9% quarterly, showing a rebound after the severe impact of the coronavirus the first trimester.
For its part, on Thursday morning 16 the monetary policy decision of the European Central Bank will be announced, where no adjustments to its interest rates are expected.
Laboral sector
On the other hand, yesterday, the number of IMSS policyholders was published in Mexico in June, where a decrease of 83,311 places was observed in relation to May. A total of 19.5 million insured were reported, equivalent to a 4.27% annual drop, the largest on record. Between March and June 1,113,677 formal jobs were lost.
Likewise, in the accumulated of the first semester of the year, the number of insured persons decreased by 921,582. By federal entity, the greatest falls in employment in annual comparison were observed in tourist states such as Quintana Roo (22.90%) and Baja California Sur (11.62%). In contrast, federal government projects in Tabasco have contributed to the state showing the highest advance of 1.38% annually.
The exchange rate is expected to trade between 22.35 and 22.65 pesos per dollar. The euro begins the session with an appreciation of 0.28%, trading at $ 1.1331 per euro, while the pound depreciates 0.18% and is trading at $ 1.2599 per pound.
Money and debt market
In the United States, the yield on 10-year Treasury bonds increases 0.7 basis points, at a rate of 0.65%, while in Mexico the yield on 10-year M bonds remains unchanged at 5.69 percent.
Derivatives market
To cover a depreciation of the peso beyond 23 pesos per dollar, a call option, with an exercise date within 1 month has a premium of 1.81% 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 22.5865 at 1 month, 23.9815 at 6 months and 23.4411 pesos per dollar at one year.
Gabriela Siller; PhD
Director of Economic-Financial Analysis.
Banco BASE
