Money markets

Exchange market.
The peso starts the session with a depreciation of 0.53% or 11.9 cents, trading around 22.75 pesos per dollar, being the sixth consecutive session that the peso loses ground against the dollar.
In the rest of the financial markets, the day is mixed, as market participants are cautious in anticipation of a second half of the week that could be volatile due to the following factors:
1) The monthly U.S. employment report. On Friday, the July non-farm payroll will be released, where it is likely that the increase in the number of coronavirus cases has had an impact on job creation. It is worth remembering that unemployment claims showed a jump in the last fortnight of the month. Hence, there is a possibility of seeing a deterioration in the U.S. labor market.
2) The approval of a fiscal stimulus in the United States With U.S. lawmakers entering a recess on Friday, there is likely to be important news about a budgetary stimulus this week. President Trump reported that he might intervene through an executive order to approve the new stimulus.
3) Political tensions between the U.S. and China. Exchanges between the two powers continue, related to the suspension of China’s TikTok application from the U.S. market on suspicion of data theft. Yesterday, Trump announced that if no U.S. company acquires this application’s rights, it must suspend operations by September 15. He added that the purchase of TikTok’s activities must include a percentage for the U.S. government, which the Chinese press called “theft”.

In the commodities market, oil begins the session with losses due to nervousness about its supply and demand fundamentals. This is because of the increase in oil production by OPEC and its allies (OPEC+) and the increase in the number of cases of coronavirus at a global level. WTI shows a contraction of 1.71% and is trading at around $40.31 per barrel.
On the other hand, some relevant economic indicators were published in Mexico. The Mexican Association of Automotive Industry (AMIA) announced domestic sales of light vehicles, which amounted to 72,897 vehicle units in July. This figure is above the 62,837 reported for June, although 31.3% below the published in July 2019. Remembering that this series does not have any kind of adjustment for seasonality, it may not be comparable with the previous month.

Also, the Composite Indicator System (SICCA) was published, where the Coincident Indicator revealed that the economy continued to contract during May, reaching 75.7 points, a level not observed since August 1996. Under this approach, the economy is in a recessive stage since November 2018, which is equivalent to 19 months and represents the most extended duration of a contracting cycle. Similarly, the Coincident Indicator of the System of Cyclical Indicators (SIC) adds 12 months below the expansion threshold, located at 89.82 points.

During the session, the exchange rate is expected to trade between 22.55 and 22.85 pesos per dollar. The euro starts the session with a minimum appreciation of 0.03%, trading at 1.1765 dollars per euro, while the pound depreciates 0.39% and trades at 1.3024 dollars per pound.
Money and Debt Market.
In the United States, the yield of 10-year Treasury bonds decreases 1.6 basis points, at a rate of 0.54%, while in Mexico, the return of 10-year M bonds remains unchanged at 5.75%.

Derivatives Market.
To cover the depreciation of the peso beyond 23 pesos per dollar, a call option, with an exercise date within one month, has a premium of 2.10% and represents the right but not the obligation to buy dollars level mentioned above.
On the other hand, the interbank forward for sale is at 22.28348a 1 month, 23.2513 at six months, and 23.7090 pesos per dollar at one year.

Source: Banco Base / Gabriela Siller