Daily Market Pulse

All eyes set on Non-farm Payrolls

5 minute read


The U.S. Dollar Index, a coefficient used to benchmark the performance of the greenback against a basket of six major currencies, rallied 0.4% off the back of upbeat unemployment data and Delta variant jitters. The ADP Employment Change posted private businesses added 692k new jobs vs 600k previously anticipated, building up expectations that Non-farm payrolls due on Friday will exceed expectations. Additionally, Fed official Robert Kaplan said that he would want to taper the bond purchase program sooner than the end of the year, reaffirming his hawkish view and support to proceed with tightening monetary policy. The USD is on its way to register the best month in 4 and a half years. Today, we expect Jobless claims to give us further insights into the condition of Job markets which slowly starts to take more protagonism on the policymakers table, while ISM manufacturing indicators will provide fresh insight into economic activity.


The EUR fell 0.32% against the USD, amid looming COVID-19 concerns and strong performing data in the U.S. imposing momentum before the common currency. However, the risk-off momentum keeps pushing the pair to levels we haven’t seen since April this year, while European data continues to be complacent, failing to impress market participants. Preliminary Consumer Price index results for June met expectations recording 1.9% yearly variation, slightly lower than the previous release. Later today, market participants will receive the European Unemployment rate and Market manufacturing PMIs with fresh data for investors to position themselves.  


The Pound Sterling continued to edge lower, recording 0.03% losses against the greenback, with intraday swigs testing key support level that, if broken, posts a significant risk on the downside. The British Pound continues to drag Brexit tussles which remain a pain for the currency performance and the government continues to extend the grace period for the Post-Brexit agreement in Northern Ireland. On the data front, the U.K economy shrank 6.1% year over year with a worse than expected quarterly performance reporting a 1.6% reduction while market expectations were set at 1.5% contraction due to COVID-19 restrictions at the beginning of the year. Moreover, Business investment deteriorated to 10.7% in Q1, below the previous reading posted at 11.9%. Coming up, BoE’s Governor Bailey is due to speak following Markit Manufacturing PMIs for the United Kingdom. 


The Japanese Yen had a sharp retracement against the greenback, recording 0.6% losses and multi-month lows. Investors rushed to buy dollars amid looming concerns over the spread of the Delta variant which has already severely impacted several countries in the APAC region. The safe-haven appeal of the JPY seems to be ignored by market participants as the Japanese government has struggled to deploy an efficient vaccination programme and control the virus, adding risk factors into the pair. Additionally, Taklan manufacturing indicators underperformed during Q2, posting soft results and missing expectations except for Large Industry Capex results which posted 9.6% gains vs 7.2% previously anticipated. The Japanese Yen continues to be under pressure as fundamentals compromise the conventional appeal of the currency and growth differentials weigh on the prospect of the appreciation.


The Canadian dollar moved marginally higher (0.04%) against the greenback, amid broader USD demand which was offset by better than anticipated Canadian growth figures. Statistics Canada released its monthly April Gross Domestic Product (GDP) figures, posting -0.3% contraction vs -0.8% previously anticipated. In addition to the strong April economic performance, GDP for March was revised up from 1.1% monthly variation to 1.3%, bolstering demand for the Loonie. On the other hand, West Texas Intermediate (WTI) edged higher amid higher than expected Crude oil inventories and OPEC + chatter ahead of today's meeting. 


The Mexican Peso retraced 0.69% against the dollar during yesterday's trading session as market participants rushed for the USD amid growing Delta variant jitters. Furthermore, the Mexican president, Andres Manuel Lopez Obrador is under pressure over medicine shortages in the country while Credit rating agency Moody's released a tough semi-annual update on Mexico’s state-owned oil company, Pemex. The report flagged that despite surging oil prices, the company runs risks of cost overruns due to doubtful returns over recent oil refinery projects, which underestimated costs by over USD two billion. In short,  it is unlikely that Moody’s will revise up Pemex’s rating.    


The onshore Yuan fell 0.1% against the dollar, dragged lower by broad dollar demand amid pandemic concerns. Trading is expected to have thin volumes as some major state-run banks will be closed for the 100th anniversary of the Chinese Communist Party on July 1st. Market participants will closely monitor developments on the Delta variant spread, as it poses significant risks for recovering economies while many investors anxiously wait for Key Non-farm payrolls on Friday to clue them in on the next move of the Federal Reserve. 


The Brazilian Real closed marginally higher (0.1%) against the greenback, recovering from an early drop during the trading session (-1.07%) amid global concern around the new virus mutation and political turmoil in the country. Corruption scandals continue to make the headlines in Brazil, as a member of Brazil’s Health Ministry allegedly asked for a one-dollar bribe per jab when negotiating with a health provider for the acquisition of 400 million doses. The constant flow of corruption issues among cabinet members of Jair Bolsonaro continues to weigh on the re-election campaign and political support ahead of elections in the second half of 2022. Moreover, Unemployment rate remained unchanged at 14.7% in April while the Primary Budget Surplus exceeded expectations by 4.5 billion.


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