The peso begins the session with little change, showing an appreciation of 0.37%, trading around 22.26 pesos per dollar. In the global financial market, the perception of risk has increased due to the decision of the United States government to order the closure of the Chinese consulate in Houston, giving a three-day notice to abandon it.

According to the State Department, the decision to close the consulate was to protect American intellectual property and private information.

In response, China’s Foreign Ministry has said the country plans to react with «firm measures.»

The escalation of tensions between the two countries makes it unlikely that progress will be made in the coming months to end the current trade war.

Likewise, tensions are reaching a level that could spread to the next US administration, even if Democrats win the presidency.

Market optimism also faded on news that Republican and Democratic lawmakers in the United States, as well as the White House, are still far from reaching an initial agreement on the fiscal stimulus package.

According to Democratic leaders, negotiations cannot begin until the White House and Republicans in Congress reach an initial agreement.

It should be noted that there is little time for the approval of these fiscal measures, as part of the unemployment support expires on July 31. Also, in August Congress goes into recess, so there is a risk that the negotiations will extend to September if an approval is not achieved the following week.

The peso and other currencies

Loss is seen in the capital markets, particularly in Asia where the Nikkei 225 in Japan lost 0.58%, while the Hang Seng in Hong Kong fell 2.25%. In Europe the main indices fall on average about 0.70%, while in the United States the futures market shows moderate falls for the main indices close to 0.20%.

Regarding economic indicators, in Mexico the Monthly Survey on Commercial Companies (EMEC) and the Monthly Survey of Services (EMS) were released, both with data as of May.

According to the EMEC, in May, retail sales registered a slight advance of 0.77% monthly, after the historical fall of 22.54% in April. Therefore, in annual terms it presents a decrease of 23.39%, adding 4 consecutive months of setbacks.

The weakness in sales continued to be concentrated in non-essential goods, with monthly drops in stationery items (-23.55%), clothing (-17.41%) and beverages, ice and tobacco (-16.50 percent).

In contrast, the 35.18% increase in department store sales stands out, an advance that could be influenced by the commemoration of Mother’s Day in the reference month.

On the other hand, wholesale sales contracted at a monthly rate of 5.13% and at an annual rate of 23.84%, the largest drop on record and adding 16 consecutive months of contractions, evidence of the fragility of the economy prior to the pandemic .

Covid-19

For its part, the EMS for May showed that total income from the supply of goods and services fell 2.3% real compared to the previous month and 29.5% real compared to the same month last year, further deepening the drop caused by the containment measures.

The most affected sectors are leisure, cultural and sports services, and other recreational services (-38.0% monthly); professional, scientific and technical services (-20.7%); educational services (-7.7%); and temporary accommodation and food and beverage preparation services (-7.6 percent).

The declines observed as a result of the pandemic, and which in most sectors continued to deepen in May, are the strongest since 2009, and far exceed the declines observed during the Great Recession.

Indicators of Banxico

However, given that the official containment measures were lifted on June 1, the data is likely to show a recovery in most subsectors of the service sector from that month.

Likewise, the June Telephone Survey on Consumer Confidence (ETCO) was released, which presented an advance of 0.9 points, to be located at a level of 32.0 points, given a slight optimism due to less mobility restrictions.

Today, the exchange rate is expected to trade between 22.15 and 22.48 pesos per dollar. The euro begins the session with an appreciation of 0.55%, trading around $ 1.1590 per euro, while the pound depreciates 0.13% and is trading at $ 1.2714 per pound.

Money and debt market

In the United States, the yield on 10-year Treasury bonds decreased 1.5 basis points, at a rate of 0.59%, while in Mexico the yield on 10-year M bonds began with little change compared to yesterday’s close, ranking at 5.81 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 1.39% 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 22.4284 at 1 month, 22.8295 at 6 months and 23.2843 pesos per dollar at one year.