According to ADP nonfarm employment report on Wednesday, private companies added 749,000 jobs in September, showing a faster than expected job growth. The figures, which were expected to come in around 600,000, are very positive. Construction, trade transportation, and leisure and hospitality, sectors that have been especially hard hit during the pandemic, had more relevant increases in job creation. Also helping to boost U.S economic recovery, the Trump administration has proposed a new stimulus proposal to House Democrats worth over USD 1.5 trillion. However, the robust U.S data and stimulus hopes pushed down the USD against the major currencies – contradicting the theory, where better figures mean a stronger currency. Today, the ISM Manufacturing Index is expected to show another further minor improvement to the U.S data.
On Wednesday, the EUR fell -0.2% amid the stronger labor data from the U.S and a renewed risk sentiment. Market participants will continue to assess the positive fundamental backdrop in the EU, and whether it will continue. Throughout the day, the currency market will receive the important manufacturing PMI data from Europe and the U.S, based on the flash manufacturing PMI released last week, analysts expect the data to show strong performance in September. Also, today, the EU begins a two-day summit with German Chancellor Angela Merkel and French President Emmanuel Macron presumably to take center stage. Merkel is likely to speak about bridging the differences between members to unlock the bloc's EUR 1.8 trillion recovery package amid concerns about a possible delay. While Macron is expected to address the conflict between Armenia and Azerbaijan.
The Sterling gained traction in the last trading session of September with the GBP up 0.4% against the greenback. The recent USD selloff on Wednesday helped to boost the GBP. However, the GBP may struggle to maintain its strength against the USD, after the government’s chief scientist, yesterday afternoon, warned the U.K’s Covid-19 outbreak is not under control with hospitalizations and death rates rising. The final scheduled round of Brexit negotiations continues today, with currency markets awaiting an update on whether the more conciliatory tone from the EU and the U.K recently will result in some tangible progress being made.
The Bank of Japan's quarterly Tankan Survey which measures overall business conditions, showed on Thursday, that big manufactures’ sentiment recovered to -27, after recording -34 in the previous survey in June. Despite the survey highlighting a slight recovery, it failed to attain the market’s expectation and flagged that the recovery could last longer than expected. Nevertheless, the JPY surged to the highest level since September 15, closing with 0.08% gains against the USD. With a lack of major drivers, today, investors and traders will keep eyes on the risk headlines ahead of the US session that carries the weekly Jobless Claims and the September month ISM Manufacturing PMI.
The CAD jumped as much as 0.52% after a new USD-selling wave that hit the markets On Wednesday. Also helping to boost the upbeat Canadian market mood, was that West Texas Intermediate (WTI) rose significantly, nearly 1.5%, and assisted the commodity-related CAD to preserve its strength against its peers in the last trading session of September. Earlier yesterday, Canada's national statistical agency reported that the Canadian economy expanded by 3% on a monthly basis in July as expected. Later today, market participants will closely watch the RBC Manufacturing PMI, which is set to marginally edge lower in September after the government imposed new measures to combat the resurgence of Covid-19 cases.
Mexico's peso jumped significantly 1.62% against the USD while Mexican stocks hit four-week highs on Wednesday. The MXN recovered the territory lost over the last three sessions and recorded its best session in three weeks after the recent USD’s weakness was exacerbated by the chaotic U.S. presidential debate on Tuesday. The MXN also saw support after the country recorded a government budget surplus of MXN 139,6M in August of 2020, slightly ahead of market expectation. During the Q3 the peso appreciated 3.7% against the greenback, showing the best performance among its peers.Mexico's peso jumped significantly 1.62% against the USD while Mexican stocks hit four-week highs on Wednesday. The MXN recovered the territory lost over the last three sessions and recorded its best session in three weeks after the recent USD’s weakness was exacerbated by the chaotic U.S. presidential debate on Tuesday. The MXN also saw support after the country recorded a government budget surplus of MXN 139,6M in August of 2020, slightly ahead of market expectation. During the Q3 the peso appreciated 3.7% against the greenback, showing the best performance among its peers.
Chinese markets are closed for a week-long holiday starting today.
On Wednesday, three major drivers led the BRL to rise slightly 0.4%. Firstly, formal job creation in the country increased sharply in August, where industry and manufacturing led to the strongest job growth in a decade for that month, according to official labor data published. Secondly, Economy Minister Paulo Guedes, said the government is analyzing expenditures to avoid overshooting the spending limit, highlighting that the payment of sovereign debt will not be put at risk by a new minimum income program. Finally, strength was drawn from the recent USD selloff against risker currencies. Later today, the focus will be on U.S Markit Manufacturing PMI, which may weigh on the BRL.