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U.S Treasury market is still drawing the investors’ attention

USD

The USD was almost unchanged (+0.03%) against a basket of major currencies on Tuesday while U.S shares paused its gains, after a near 10% rally on Wall Street over the last week. On the other hand, the U.S Treasury market is still drawing the investors’ attention, with both 10 and 30-year yields ending the day higher in a continued upward trend. On the economic data front, yesterday the Job Openings and Labor Turnover Survey (JOLTS) reported that job openings changed little at 6.4 million in September, with the softening in hires the main concern (6.0 million to 5.9 million).  That means, the U.S. economy is seeing a significantly slower pace of hiring than it experienced before the recession, which is a big problem given that the country has more than 11.6 million jobs to make up. Thus, a potential U.S administration under Biden will be facing a mounting, not waning, crisis. Today, American stock exchanges have special hours due to a national holiday (Remembrance Day) rather than a full closure, but government debt markets are closed.

EUR

The EUR was flat on Tuesday, after a quiet trading session. Market participants are increasing hopes for the Covid-19 vaccine and closely watching evidence of a renewed slowdown in the German economy and its peers. Late yesterday, the ZEW Indicator of Economic Sentiment for Germany took a sharp decline in the current November 2020 survey, dropping 17.1 pts to a new reading of 39.0 pts compared to October. The Survey has once again absorbed concerns about the economic impact of the 2nd wave of Covid-19 and what this will entail in business. Meanwhile, Italian industrial output was weaker than expected in September, falling 5.6% from the previous month after four consecutive gains, the national statistics bureau ISTAT reported. Today, ECB policymakers are speaking on climate change this afternoon of which could draw the market’s attention.

GBP

The pound had a strong rally yesterday, gaining as much as 0.82% against the dollar, rising to two-month highs. The rise was supposedly sponsored by a broadly weaker USD and headlines related to the Brexit talks. Investors are still digesting the House of Lords voting to remove some of the more controversial clauses – those that would break international law – from the Internal Market Bill. Moreover, without much impact on price action, Joe Biden called PM Boris Johnson to warn the British leader not to compromise peace in Northern Ireland in his pursuit of Brexit. According to Bloomberg, a British official confirmed that Biden raised the Good Friday Agreement in the context of Brexit negotiations and that Johnson responded by promising the president-elect that Britain would uphold the peace accord. On the economic data front, the UK's unemployment rate rose to 4.8% in the three months to September, up from 4.5%, as Covid-19 continued to hit the jobs market, the Office for National Statistics (ONS) said on Tuesday.

JPY

The Japanese Yen was almost unchanged (-0.08%) against the greenback on Tuesday after a sharp tumble of 2% the day before. During the trading session, Japanese data was mixed and its impact was muted, as the September Trade Balance printed a surplus of ¥918.4 billion, better than anticipated, although the Eco Watchers Survey on the current situation improved by less than anticipated in October, printing at 54.5 from 49.3 in September. Today, investors will keep an eye on Core Machinery Orders in September and Product Price Index in October, both are a major indicator of manufacturing production and are expected to show some improvement.

CAD

A positive tone around oil prices might continue to underpin the CAD, however, a slight technical correction was seen yesterday, with the Loonie closing 0.17% down against the USD. Aside from upward oil prices and the U.S election, the economy’s biggest threat is still the Covid-19, with caseloads surging again and resulting in new restrictions on indoor dining, bars, and personal-care services in several parts of the country. Today, the Canadian stock exchange has special hours due to a national holiday (Remembrance Day) rather than a full closure, but government debt markets are closed.

MXN

The MXN found a firm direction after volatility early-on in the trading session on Tuesday. The Mexican peso edged higher 0.07% and registered its sixth consecutive session of gains against the USD amid a positive prospect for the peso. The MXN has been able to capitalize on a surge in oil prices after news of U.S drugmaker Pfizer’s potential Covid-19 vaccine, as well as the improved trade sentiment after Biden projected to be the 46th President of the United States. Today, market participants will closely watch the Industrial Production in September, which is projected to show some improvement of around 2.5% month-on-month.

CNY

The CNY extends its bullish momentum into the second straight day against the US dollar. The Chinese yuan closed 0.14% up in the early Asian session on Wednesday. Investors will digest the latest financial stability report from the People’s Bank of China (PBOC), which signaled a sharp acceleration in efforts by the banking-sectors financial institutions to dispose of non-performing loans over the past three years. The report “China Financial Stability Report (2020)” also highlights efforts to contain risk concerning online finance and illegal fund-raising in the country, with P2P online lending platforms dropping to just 29 as of the end of the second half of 2020 as compared to around 5,000 during their peak, and the volume of loans and participating individuals declining for the 24th consecutive month.

BRL

Although the Brazilian economy has been growing well, the lack of clarity as to public finances and faltering reform plans overshadow the more risk-on environment abroad on Tuesday. The BRL closed down 0.54% against the USD for the second session in a row. Unlike the FX market, the Brazilian stock market has been catalyzed by the optimism of the global market, which was boosted after the American pharma giant Pfizer announced the positive prospect of its Covid-19 vaccine. The Brazilian share Index, Ibovespa, soared 1.5% higher for the sixth straight session and has gained almost 12% in November. Today’s focus will be on the key Retail sales, which is expected to continue to grow at a moderate pace.

Quick Insights

USD: U.S. economy is seeing a significantly slower pace of hiring

USD: U.S. economy is seeing a significantly slower pace of hiring

EUR: A renewed slowdown in the German economy and its peers

EUR: A renewed slowdown in the German economy and its peers

GBP: UK's unemployment rate rose to 4.8% in the three months to September

GBP: UK's unemployment rate rose to 4.8% in the three months to September

JPY: Investors will keep an eye on Core Machinery Orders

JPY: Investors will keep an eye on Core Machinery Orders

CAD: A positive tone around oil prices might continue to underpin

CAD: A positive tone around oil prices might continue to underpin

MXN: The MXN has been able to capitalize on a surge in oil prices

MXN: The MXN has been able to capitalize on a surge in oil prices

CNY: The CNY extends its bullish momentum into the second straight day

CNY: The CNY extends its bullish momentum into the second straight day

BRL: Domestic concerns overshadow the more risk-on environment abroad

BRL: Domestic concerns overshadow the more risk-on environment abroad

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