The Mexican peso also appreciated momentarily. However, it started the session with a depreciation of 0.54% or 11.8 cents, trading at around 21.88 pesos per dollar.
MEXICO (Banco Base) – During the overnight, the exchange rate reached a maximum of 21.9761 pesos per dollar, due to the general strengthening of the U.S. dollar and lower demand for risk instruments at the global level. It is worth remembering that the financial markets showed a steady gain in the last few days, so these movements in the exchange market are the result of corrections and profit-taking.
At the beginning of the session, a return of optimism is observed in the financial markets after the European Central Bank extended its bond purchase program by 600 billion euros until June 2021. The exchange market reaction has been positive, with the euro erasing losses from the overnight and starting with an appreciation of 0.23% in 1,1259 euros per dollar, accumulating eight consecutive sessions on the rise, and an appreciation of 3.33%.
Other currencies that appreciate are the Brazilian real that advances 0.73%, the Norwegian crown that values 0.50%, and the South African rand, with an appreciation of 0.49%. The capital markets in Europe also erased their losses, to register moderate gains just above 0%.
The Mexican peso also appreciated momentarily. However, it started the session with a depreciation of 0.54% or 11.8 cents, trading at around 21.88 pesos per dollar. During the course, it is likely that caution will continue. Tomorrow the monthly labor market report will be published in the United States, where the loss of 8 million jobs during May and additional growth of the unemployment rate to about 19% is expected.
This morning, initial claims for unemployment support stood at 1.877 million, showing a gradual decline as the U.S. economy stabilizes. Continued unemployment support claims, which are those people who continue to receive the benefit, stood at 21.487 million, slightly higher than last week.
Another factor contributing to the movements of the Mexican peso is the political uncertainty in the United States. Acting Defense Secretary Mark Esper said in a press conference yesterday, June 03, 2020, that he did not support the use of the 1807 insurrection act to stop the protests by using the military. Also, former defense secretary James Mattis was more aggressive in his criticism, denouncing that the president’s actions seek to divide the society. This represents a severe blow to Trump’s aspirations to continue in a second term in the presidency of the United States.
During the session, an exchange rate of between 21.35 and 21.80 pesos per dollar is expected. The euro began the session with an advance of 0.56%, trading at 1.1233 dollars per euro. In comparison, the pound showed an appreciation of 0.19% to 1.2575 dollars per pound.
Money and Debt Market.
In the United States, the yield on 10-year Treasury bonds remains unchanged at 0.75%. In contrast, in Mexico, the return on 10-year M bonds increases 1.3 basis points to 6.15%.
To cover the depreciation of the peso beyond 22 pesos per dollar, a call option, with an exercise date within one month, has a premium of 2.15% and represents the right but not the obligation to buy dollars at the level mentioned above.
On the other hand, the interbank forward for sale is at 21.8499 at one month, 22.2878 at six months, and 22.7717 pesos per dollar at one year.
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