Daily Market Pulse

USD

Markets remain reasonably quiet early Monday as investors prepare for crucial central bank policy announcements later in the week. Following a minor rise in the second half of the previous week, the U.S. dollar Index has remained in a tight channel at around 102.00. Investors are watching the Federal Reserve's major interest rate decision this week with bated breath. The U.S. Federal Reserve is largely expected to announce a lesser quarter-point increase on Wednesday, with investors looking for hints on the direction of interest rate hikes. Traders are also anticipating a busy earnings week, which will include reports from McDonald's, General Motors, Apple, Meta, Amazon, and Alphabet.

• Wednesday 01 Feb - Fed Interest Rate  Decision
• Thursday 02 Feb - Nonfarm Productivity Q4
• Friday 03 Feb - Nonfarm Payrolls and Unemployment Rate (Jan)

EUR

The Euro ended the previous week nearly unchanged. The common currency rose in the early hours of the Asian session, holding near its highest level since last April. Investors' optimism was bolstered by a flurry of central bank meetings this week, as well as stronger-than-expected Spanish inflation figures. The European Central Bank is expected to hike interest rates by 50 basis points on Thursday, raising borrowing costs to their highest level since 2008. Traders will also be searching for evidence of a slowdown in the pace of tightening at the March meeting. In other news, Eurozone Economic Sentiment reached a 7-month high of 99.9 in January 2023, the best level since June and well higher than market predictions of 97.0. In the fourth quarter.

• Monday 30 Jan - Consumer Confidence and Economic Sentiment (Jan)
• Tuesday 31 Jan - GDP Q4 | ECB Bank Lending Survey
• Wednesday 01 Feb - HICP (Jan) | Unemployment Rate (Dec)
• Thursday 02 Feb - ECB Monetary Policy Decision
• Friday 03 Feb - Nonfarm Payrolls and Unemployment Rate (Jan)

GBP

Sterling was unable to make a strong move in either direction ahead of the weekend, and it finished the week flat. The currency extends its sideways grind in the early European session, not far from a near six-week peak. Traders are looking forward to the Bank of England's policy decision this week. The Bank of England is likely to hike interest rates by half a point to 4.0% in order to combat double-digit inflation, but markets are divided on how much further rates will rise. Elsewhere, while addressing on Friday, UK Chancellor of the Exchequer, Jeremy Hunt, claimed that the best tax cut would be a "drop in inflation. Finally, the prospect of the UK entering a recession with rising interest rates, strikes, and sluggish consumer demand weighed on sentiment.

• Thursday 02 Feb - BOE Monetary Policy Decision
• Friday 03 Feb - S&P Global PMIs (Jan)

JPY

During Asian trading hours on Monday, the Japanese Yen rose against the U.S. dollar before losing momentum. According to Reuters, a panel of academics and business executives has encouraged the Bank of Japan (BoJ) to make the 2% inflation target a long-term goal. According to reports, the proposal also emphasized the need for interest rates to grow more in line with economic fundamentals and to normalize Japan's bond market function. Meanwhile, "I believe it is possible to achieve a 2% inflation objective, accompanied by wage growth, by maintaining current easy policy," BoJ Governor Haruhiko Kuroda said earlier in the day.

• Monday 30 Jan - Unemployment Rate (Dec) | Retail Trade (Dec) 
• Tuesday 31 Jan - Consumer Confidence Index (Jan)
• Wednesday 01 Feb - Manufacturing PMI (Jan)

CAD

The Loonie is dropping today after finishing Friday with little gains (0.08%). The currency was pulled down by a muted tone surrounding crude oil prices, which functioned as a tailwind. Nonetheless, the dollar's weakness prohibits traders from entering aggressive bets, limiting further losses for the Loonie. In terms of data, Canada's government budget deficit increased from CAD 1.4 billion in November 2021 to CAD 3.4 billion in November 2022. In other news, traders will be looking for new momentum in the form of GDP statistics, which will be released tomorrow.

• Tuesday 31 Jan - GDP (Nov)
• Wednesday 01 Feb - S&P Global Manufacturing PMI (Jan)

MXN

Peos rose 0.14% on Friday but is now down 0.06% as the market stays quiet ahead of important policy developments later this week. Mexican swap rates rose a few basis points on Friday, in line with higher U.S. yields; the TIIE curve currently expects a 30bp rate increase at the February 9 Banxico meeting and another 25bp hike in March before the tightening cycle finishes above 11%. Meanwhile, President Lopez Obrador stated on Friday that Mexico has a number of options to assist national oil corporation Pemex, including converting Pemex bonds to sovereign debt and lowering Pemex taxes to help with debt payments. Following AMLO's remarks, Pemex bonds were the strongest performers in the high-yielding bond market on Friday. Traders are now anticipating consumer confidence and fiscal balance data this week.

• Monday 30 Jan - FIscal Balance (Dec) 
• Friday 03 Feb - Consumer Confidence (Jan)

CNY

The offshore Yuan strengthened versus the dollar, lingering at its best levels in over six months, as solid holiday spending and tourism figures over the week-long Lunar New Year celebrations fuelled optimism of further Chinese economic rebound, bolstering market mood. Over the weekend, Chinese officials also stated that they would support consumption recovery as a significant economic engine and attempt to increase imports, boosting the outlook in Asia's largest economy. The country's economy grew 2.9% year on year in the fourth quarter, decreasing from 3.9% in the previous quarter but above estimates of a 1.8% increase. However, full-year GDP growth in 2022 was 3%, well below the declared objective of 5.5%. In terms of monetary policy, the People's Bank of China held its benchmark lending rates steady for the fifth consecutive month at its January meeting as authorities sought to boost market confidence and support the economy.

• Tuesday 31 Jan - NBS and Non-Manufacturing PMI (Dec)
• Wednesday 01 Feb - Caixin Manufacturing PMI (Jan)
• Friday 03 Feb - Caixin Service PMI (Jan)

BRL

The Real opens volatile this Monday, with a focus on interest rate decisions in Brazil and the United States. On the external front, investors are wary of a succession of interest rate increases by major central banks this week. Locally, financial market economists boosted their inflation forecast for this year from 5.48% to 5.74%, the seventh straight increase. The financial market increased its prediction for 2023 GDP growth from 0.79% to 0.80%. On Wednesday, the Monetary Policy Committee (Copom) will determine how the economy's basic interest rate, the Selic, which is now at 13.75%, will be maintained. The fresh moves made by Petrobras' new president, Jean-Paul Prates, are also being closely watched.

• Monday 30 Jan - Inflation Index (Jan) | BCB Focus Bulletin
• Wednesday 01 Feb - BCB Rate Decision | S&P Manufacturing PMI (Jan)
• Thursday 02 Feb - FIPE’s IPC Inflation (Jan) | Trade Balance (Jan)