Daily Market Pulse

Dollar regains its momentum starting a new week

USD

Following Friday's decline, the U.S. dollar Index (DXY) rose to begin the new week on a good note. The dollar outperforms its rivals as a safe haven due to the cautious market sentiment ahead of significant central bank events. The one-year and five-year inflation expectations components of the University of Michigan's Consumer Sentiment Survey fell from August levels last Friday, forcing the DXY to give up some of its weekly gains. Also, U.S. President Joe Biden stated over the weekend that the U.S. military would defend Taiwan in the event of a Chinese invasion. This remark appears to be escalating geopolitical tensions at the start of the new week. The mood in the market remains cautious, with U.S. stock index futures down between 0.4% and 0.8%.

  • Tuesday 09/20/2022 - Building Permits and Housing Starts (Aug)
  • Wednesday 09/21/2022 - Fed’s Interest Rate Decision
  • Thursday 09/22/2022  -  Initial Jobless Claims (Sep 16)
  • Friday 09/23/2022 - S&P PMIs (Sep)| Fed’s Powell Speech

EUR

The Euro dipped below the $1 parity level this morning ahead of the Federal Reserve's interest rate decision on Wednesday, when officials in the United States are expected to raise the fed funds rate by at least 75 basis points for the third time. Meanwhile, the ECB hiked interest rates by an unprecedented 75 basis points (bps) in September, following a 50-bps boost in July, and signaled more hikes in the coming sessions despite recessionary risks. ECB Vice-President de Guindos stated that the central bank does not expect the European economy's downturn to reduce inflation on its own, underlining that interest rates must continue to climb in order to anchor inflation expectations and avoid second-round consequences. Markets await the speech of ECB official De Guindos in the second half for fresh insights.

  • Monday - 09/19/2022 - ECB De Guindos Speech 
  • Tuesday 09/20/2022 - ECB Lagarde Speech 
  • Thursday 09/22/2022  -  Consumer Confidence (Sep)
  • Friday 09/23/2022 - S&P PMIs (Sep)

GBP

Last Friday, the British Pound hit a new multi-decade low (0.41%) before making a slight comeback this morning. Due to Her Majesty Queen Elizabeth II's State Funeral, UK markets will be closed on Monday. According to the most recent data, electricity costs in the United Kingdom plummeted to GBP 360 per megawatt hour, 35% below August highs, owing to price-cutting initiatives and imminent recession fears that depressed energy commodity prices. Traders are now focused on the Bank of England's policy meeting on Thursday.

  • Thursday 09/22/2022  - BOE Interest Rate Decision
  • Friday 09/23/2022 - S&P PMIs (Sep)

JPY

Following a 0.42% gain on Friday, the Japanese Yen is seeing a fresh sell-off on Monday morning amid renewed dollar strength. The U.S. consumer inflation figures for August all but confirmed expectations for the Fed to tighten policy more aggressively, undermining the Yen. In contrast, the Bank of Japan has lagged far behind in the process of policy normalization and is still committed to monetary easing. This marks a big divergence in comparison to a more hawkish stance adopted by other major central banks. Speculation that the Bank of Japan will soon intervene to stop any further decline in the domestic currency might lend some support to the Yen. Traders are now anticipating CPI data and the Bank of Japan's monetary policy decision later this week.

  • Tuesday 09/20/2022 - National CPI (Aug)
  • Thursday 09/22/2022  - BOJ Interest Rate Decision

CAD

The Canadian dollar is still falling after having dropped 0.28% on Friday. The commodity-linked Loonie was weakened by the cautious market mood and a drop in crude oil prices. WTI crude futures fell to $84.5 per barrel on Monday, extending a three-week slide as aggressive monetary tightening and recession fears weighed on demand expectations ahead of the European Union's embargo on Russian oil in December. In other news, monthly declines in housing starts and wholesale sales have been added to the recent batch of troubling data for the Canadian economy. Going forward, traders will be watching the BOC's Consumer Price Index figures tomorrow.

  • Tuesday 09/20/2022 - BOC CPI (Aug)
  • Friday 09/23/2022 - Retail Sales (Jul)

MXN

The Mexican Peso has lost steam after gaining 0.17% on Friday. Mexican markets were closed for the holiday on Friday. Still, the Peso has continued to trade abroad. Due to the closure of the local market, Mexican swaps barely changed on Friday; rates have registered double-digit gains this week on the back of skyrocketing. Meanwhile, Fitch Ratings stated in a research Friday that Pemex, the state-owned oil business, has failed to leverage rising oil prices due to a high government take. Finally, while structural tremors continue to disturb price formation, Banxico will raise its main rate by 75 basis points this month.

  • Wednesday 09/21/2022 - Retail Sales (Jul) 
  • Thursday 09/22/2022  -  Half Month Inflation (Sep)

CNY

The Chinese Yuan has lost 0.50% against the U.S. dollar today and appears to be nudging lower. Cautionary sentiments ahead of a busy week of central bank announcements, highlighted by the U.S. Federal Reserve's expected hefty rate hike, send the Yuan lower. Geopolitical fears also dampened sentiment when U.S. President Joe Biden indicated in an interview on Sunday that U.S. soldiers would support Taiwan if China invaded. Meanwhile, today morning, the People's Bank of China (PBoC) reduced the borrowing cost of 14-day reverse repos from 2.25% to 2.15% in order to revive credit and support the sputtering economy. In other news, foreign direct investment into China increased 16.4% year on year in the first eight months of the year to CNY 892.74 billion (USD 138.41 billion).

  • Monday 09/19/2022 - FDI (Aug)
  • Tuesday 09/20/2022 - PBOC Interest Rate Decision

BRL

Last week, the Brazilian currency closed with the biggest weekly loss against the dollar in more than two months. The main focus continues to be the evolution of monetary policy in the U.S. Mixed data, and contradictory aspects of the U.S. economy make it difficult for the Federal Reserve and bring more uncertainty to the global economy. On the domestic front, the market closely follows the political movement in the final weeks before the elections. The electoral contours continue to indicate a fierce dispute between Lula and the current president, Bolsonaro – suggesting that the country remains divided and polarized.

  • Monday 09/19/2022 -  Focus Bulletin
  • Thursday 09/22/2022 - Selic Interest Rate Decision
  • Friday 09/23/2022  - Internal Revenue Service
 

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