Exchange Market.

In a day without significant economic indicators in Mexico and the United States, the peso starts with a depreciation of 0.79% or 16 cents, standing around 20.54 pesos per dollar, amid a decrease in the demand for risk assets. The European equity market shows losses, while the US money market sees a greater demand for Treasuries, whose 10 year rate shows a decline of 4 basis points to 2.40%. The price of gold shows an increase of 0.23% at the beginning of the day, accumulating a gain of 0.68% in the week and trading at 1,242.03 dollars per ounce.

Although several Fed officials have made optimistic comments about the US economic performance, the market again questions Donald Trump’s work plan, as it will be until March when he will give his initial detail of his tax reform. There is also nervousness in Europe as the right wing candidate, Marine Le Pen in France has gained momentum, whose odds of winning rose form 24% to 35% in just two weeks.

At the beginning of the session, the pound is the second largest loser after the peso, depreciating 0.53% against the dollar and trading at 1.2423 dollars per pound, following the release of the January retail sales that showed a monthly decline of 0.2%, contrary to an anticipated growth of 0.7%. This is the third consecutive decline in retail sales in the UK and confirms a weakening of consumption at the start of the year, making it likely that the Bank of England may reiterate is accommodative stance at its scheduled meeting on March 16.

In Mexico, the message of the Finance Ministry is expected in relation to the new adjustment to gasoline prices that will be applicable from the following week. During February the prices of gasoline have been subsidized through a fiscal stimulus through IEPS of 1.773 pesos per liter to Magna gasoline, 0.157 for Premium and 1.601 for Diesel. Under the assumption that production and distribution costs are maintained and the fiscal stimulus is withdrawn, gasoline prices would be 17.69 pesos per liter for Magna, 17.97 for Premium and 18.58 for Diesel. On the other hand, assuming that the Finance Ministry maintains fiscal incentives, the price of gasoline would be 15.91 pesos per liter Magna, 17.71 Premium and 16.97 Diesel, which represents a decrease in the price of 0.47%, 0.42% and 0.44%.

During the session, the peso is expected to trade between 20.45 and 20.65 pesos per dollar in interbank quotes on sale. The Canadian dollar is trading near 1.3095 per dollar. The euro starts trading at around 1.0655 per euro, while the pound starts trading at 1.2432 per pound.

Money Market.

In the money market, the yield on 10-year Treasury bonds starts with a 4-basis-point decline, standing at 2.40%, as demand for safe haven assets increases. In Mexico, the yield on 10-year M bonds shows an increase of 3 basis points to 7.45%.

Derivatives Market.

To hedge against a depreciation of the Mexican peso beyond 22.00 pesos per dollar, a purchase option (call), with an exercise date within one month has a premium of 0.73% and represents the right but not the obligation to buy dollars at that level.

On the other hand, the interbank forward for sale in one month stands at 20.6059, 21.0755 at 6 months and 21.6685 pesos per dollar at a year.

Gabriela Siller gsiller@bancobase.com
Jesus A. López jlopezf@bancobase.com
Tel. 01 800 837 7100

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