Daily Market Pulse

USD benefits after President Trump signs executive order

8 minute read


U.S. stock futures were mixed in early trade overseas on Monday after President Donald Trump signed several executive orders aimed at extending coronavirus relief. Dow Futures and S&P Futures showed gains, while the NASDAQ Futures were lower. The President’s executive orders will continue the distribution of expanded unemployment benefits, defer student loan payments through 2020, extend a federal moratorium on evictions, and provide a payroll tax holiday. However, the unemployment benefit will be continued at a reduced rate of $400 per week, originally $600 per week. The President was forced to take this action after congressional leaders failed to make progress on a new coronavirus stimulus package last week. Several benefits from a package signed earlier in the year lapsed at the end of July, raising uncertainty about the U.S. economy moving forward. The USD is benefiting from this move as well as the upbeat Non-Farm payroll report issued Friday. USD-Equity markets continue their relationship, as one goes up the other moves down. US Treasury yields moved higher overnight as the 10-year note was trading at 0.5673% and the 30-year bond was trading at 1.2431%. Traders will be looking towards Washington and the possibility of renewed negotiations between Democrats and Republicans to finally get an agreement done. US-China relations could push the USD as well.


After making strong gains last week the EUR/USD has fallen overnight as technical indicators are pointing towards the single currency moving lower. The 50-day moving average has crossed the 100 and 200-day moving averages and RSI has touched 30 a few times overnight. The move lower began on Friday after the release of upbeat job figures from the US and is also being fueled by the escalating tensions between the US and China. Eurozone Sentix Investor Confidence rose from-18.2 to -13.4 in August beating expectations of -15.2, as Europe attempts to emerge from the Covid-19 crisis. This survey has continued to show improvement since falling to its lows in April when viral infections were at their peak. There is concern that infection level is rising and with the number still in negative terms, pessimism on the economy remains. After reaching and failing to break through the highs reached last week, trader sentiment is likely to turn negative for the time being and profit-taking could see the move lower in EUR extend towards a deeper correction.


GBP/USD is trading lower this morning after a survey was released over the weekend concerning UK jobs. The Financial Times has stated that one in three British businesses are planning job cuts in the third quarter of this year as the government’s coronavirus furlough scheme wind down, a survey of 2,000 companies has found. The study by the Chartered Institute of Personnel and Development found the number of employers expecting to make redundancies had jumped from 22 percent earlier this year to 33 percent for the three months to the end of September. The net employment balance, which measures the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels, has fallen from minus 4 to minus 8 over the past three months. Sectors, such as hospitality, transport, and retail, that were struggling to operate in a time of social distancing, registered the steepest falls in confidence. Suffice to say, this has brought pressure on the pound as the 50-day moving average has also crossed the 100 and 200-day moving averages and the RSI level at the moment is at 34. UK economic numbers that are due out this week are not expected to be GBP positive and pressure may remain on the pound.


USD/JPY traded quietly overnight in Asia as both Singapore and Japan were on holiday, but the currency pair has moved higher in European trading. USD/JPY has broken through resistance levels and looks to complete the move upward after reaching yearly low on July 31. Technically, the 50-day moving average has crossed the 100 and 200-day moving averages, and RSI is flirting with the 70 level, currently at 69. Earlier resistance levels are now being seen as support and the move higher in USD/JPY is expected to continue today. In other news, Japan’s new Financial Services Agency commissioner, Ryozo Himino spoke over the weekend regarding cryptocurrencies, speaking positively about the Bank of Japan researching the digital payments sector. He said that Japan “must really think hard” about using cryptocurrencies for payments. These comments did not seem to affect the USD/JPY at the moment.


USD/CAD is higher this morning, following the USD move higher against other currencies and despite the rise in oil prices overnight and into this morning. Technically, like the rest of the currencies, we have seen a move where the 50-day moving average has crossed the 100 and 200-day moving averages, pushing the currency pair higher. RSI has tested the 70 level, but currently is trading at 65. After the Saudi’s spoke of increased demand from Asia and Iraq pledged to add to supply cuts, the oil futures moved higher, with Brent crude futures rising $0.40 to $44.80 per barrel and US West Texas Intermediate crude futures rising $0.50 to $41.72 per barrel. The move higher in USD/CAD seems to be due to better US statistics and if that continues, the USD/CAD could test higher levels this week as traders are looking at the US economic figures more than the current moves in oil pricing. Expect a higher USD/CAD during trading today.


Mexico’s central bank is seen cutting its key interest rate this week to the lowest level in four years, despite inflation that is slowly ticking upwards, to help assuage the economic fallout of the coronavirus pandemic, a Reuters poll showed late on Friday. At their monetary policy meeting on Thursday, the Bank of Mexico is expected to reduce the benchmark interest rate by 50 basis points to 4.50%, according to 20 of 24 analysts’ projections. This would be the tenth consecutive reduction. Annual inflation in July rose to its highest level in five months, but forecasts for the central bank to cut rates were likely unchanged as the rise in consumer prices was in line with expectations. Mexico entered a recession in 2019 and the economy is expected to shrink by up to 10.5% this year. Finance Minister Arturo Herrera has said that would be the steepest decline since the Great Depression in the 1930s. GDP shrank by a historic 17.3% in the second quarter of 2020 from the previous three months as the pandemic shut factories, and kept shoppers and tourists at home hurting trade. USD/MXN remains close to strong resistance levels as we start the week.


The US and Chinese trade negotiators will meet this week to take stock of the trade deal and this will be on trader’s radar this week. To this point, despite the tensions between the two countries, they have been sticking to the Phase One accord agreed to in January. Overnight, China did arrest Jimmy Lai, one of Hong Kong’s best-known publishers on suspicion of collusion with foreign agents. After the US sanctioned Chinese official last week, China said it will sanction 11 US politicians including Senators Ted Cruz and Marco Rubio. Adding to the tension, US Health Secretary visited Taiwan and Beijing was not happy about that. Traders seem to be looking past this saber-rattling by both the US and China, but comments made during the day in Washington could change that in a hurry.


Brazil reported 49,970 new cases of the coronavirus and 905 deaths from the disease caused by the virus in the past 24 hours, the health ministry said on Saturday. Brazil has registered 3,012,412 cases of the virus since the pandemic began, while the official death toll from COVID-19 has risen to 100,447, according to ministry data, which is the world’s worst coronavirus outbreak after the United States. Brazilian billionaire Jorge Lemann’s foundation and other business interests announced plans to fund the building of the factory to produce the COVID-19 vaccine being developed by Oxford University and pharmaceutical company AstraZeneca PLC. The Lemann Foundation said in a statement late Friday that it will take 100 million reais ($18 million) to build the factory. When completed the factory will be ready to produce 30 million doses of the vaccine per month as of the beginning of 2021. The Brazilian government sees the British vaccine as the most promising of the vaccines that are being developed by researchers worldwide. The Oxford/AstraZeneca vaccine is being tested on Brazilian volunteers in a study led by the Federal University of São Paulo that is also funded by the Lemann Foundation.


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