The peso closes January with a cumulative gain of 2.73%; the dollar is sold at 19.52 pesos

Amid the uncertainty caused by the degradation in the credit notes of Petróleos Mexicanos (Pemex) by rating agency Fitch Ratings, the peso closed January with an accumulated appreciation against the dollar of 2.73% or 53.7 cents.

The peso closes January with a cumulative gain of 2.73%; the dollar is sold at 19.52 pesos
The peso closes January with a cumulative gain of 2.73%; the dollar is sold at 19.52 pesos

In bank branches, the green ticket was offered on the last day of the first month of the year at 19.52 pesos, while at the interbank level it was quoted at 19.12 units.

According to the analysis of the Base Bank, the Mexican currency was driven by several factors, among which the generalized weakening of the US dollar stands out in the expectation that the Federal Reserve (Fed) will probably slow down the rate of increases at the rate of interest.

In its first announcement of monetary policy in the year, released on January 30, the Fed argued that they will be patient to make adjustments to the interest rate again and added that they could modify the rate at which the balance sheet is reduced. balance, which has been interpreted as an accommodative communication.

Second, the Base Bank explained that the trade negotiations between China and the United States seem to be moving forward, which contributed to a lower perception of risk in the markets.

"Although it is unknown when they will reach an agreement to end the trade war that began in 2018, in the first weeks of the year there have been signs that the Chinese government is willing to reduce its trade deficit with the United States. Also, it has been said that they are working on industrial protection issues because the current laws in China have negatively affected US companies, " it explained.

The third factor that drove the peso was the decrease in uncertainty with respect to the new administration, which had risen after the cancellation of the New Mexico International Airport (NAIM) in October 2018.

In fact, during January, the 10-year M yield rate showed a decline of 24 basis points to 8.41%. The least uncertainty was due to the publication of the fiscal package 2019, which was released in mid-December and which raised a primary surplus of 1% of GDP for 2019 and 0.9% for the rest of the six-year term.

At the same time, economic criteria were considered mostly sensible for the market, such as economic growth of 2%, an exchange rate of 20 pesos per dollar, an oil price of 55 dollars per barrel, and an interest rate of 8.3%. However, the projected inflation of 3.4% for 2019 is below the Base Bank estimates.

The outlook for the coming months was overshadowed by the downgrade of Pemex, as well as by a lower estimate for the economic growth of the country by the International Monetary Fund (IMF).

In this sense, the analysis indicated that "although the decision of Fitch Ratings generated upward pressures on the exchange rate, the communication from Moody's, which decided to give a vote of confidence in the government's actions on Pemex, contributed to its moderation. the speculation against the peso at the end of the month. "

According to the Base Bank, there is still skepticism about the policies that the federal administration seeks to implement and its consequences on public finances and economic activity, which could become a greater perception of risk in the country.

To make matters worse, during January other internal events that had a moderate impact on the risk perception of the country were also presented.

From the first half of the month, the strategy of combating the theft of fuel by the federal government caused a shortage of gasoline, mainly in the central states of the country.

For its part, in Michoacán, the National Coordinator of State Workers (CNTE) carried out roadblocks at at least seven points in the state, which were announced and concluded on January 31.

Finally, in Matamoros Tamaulipas, 45 maquiladora companies, of which 17 are from the automotive sector, ceased operations in response to salary demands, as a result of the decree of an increase in the minimum wage of 100% on the northern border as of January 1.

Although more than 20 companies have already reactivated operations and yielded to the demands of workers, it is pointed out in the media that at least 15 plan to close permanently, as the decision to return to operate has been only to temporarily comply with contracts and avoid lawsuits .