Daily Market Pulse

Dollar starts new month on a strong foot

USD

After losing 0.68% against its major rivals on Friday, the dollar began the first trading day of May on a strong note. The cautious market mood aids the greenback's early Monday demand. Fears of an economic downturn in Europe and China, caused by the Ukraine Russia war and Covid lockdowns, respectively, prompted safe-haven flows into the dollar. Meanwhile, traders are bracing for a major Federal Reserve meeting taking place later this week, where interest rates are largely expected to be raised by 50 basis points. Fed policymakers appear ready to deliver a series of hawkish rate hikes through at least the summer to deal with rising inflation and surging labor costs, despite two reports on Friday indicating both may be nearing their peaks. In the markets, U.S. equities futures rose slightly, while stocks in Europe and Asia fell. Moving forward, the ISM will publish the April Manufacturing PMI statistics for the United States.

  • Monday 05/02/2022 - ISM Manufacturing PMI (Apr)
  • Tuesday 05/03/2022 - Factory orders (Mar)
  • Wednesday  05/04/2022 - ADP employment change (Apr) ¦ ISM Service PMI (Apr)   ¦ Fed's interest rate decision 
  • Friday  05/06/2022 - Non-Farm Payrolls (Apr) ¦ Unemployment rate (Apr)

EUR

The Euro consolidated its gains this morning after closing 0.44% higher against the greenback in the previous session. The Euro remains steady, maintaining near levels not seen since December of 2016, amid a stronger dollar underpinned by expectations that the Fed will raise the fed funds rate by 50 basis points this week, the second consecutive rate hike and the largest since 2008. At the same time, traders are afraid that the European Central Bank will maintain a more cautious monetary policy and will take much longer than the Fed to begin tightening, despite the fact that the Eurozone's inflation rate continues to hit new record highs. Investors are now pricing in over 90 basis points of ECB rate hikes by the end of the year, expected to be delivered between three to four increases. The ECB's deposit rate is set to rise for the first time in July. In other news, the European Union (EU) is preparing to phase out Russian oil imports by the end of the year. Furthermore, Europe's Stoxx 600 sank following a gloomy Asian session hampered by holiday closures.

  • Monday 05/02/2022 - Business climate (Apr) ¦ Consumer Confidence (Apr) 
  • Tuesday 05/03/2022 - Unemployment rate (Mar)  ¦ ECB Lagarde Speech
  • Wednesday  05/04/2022 - Retail Sales (Mar) 
  • Thursday  05/05/2022 - ECB Lane Speech

GBP

The Pound sterling closed 0.84% higher on Friday before consolidating its losses on Monday morning. In the latest news, the average price of a home in the United Kingdom has risen to a new high of £267,620. Prices increased by 0.3% month over month. Meanwhile, investors weighed another round of UK earnings while waiting for the Bank of England meeting later this week. Markets in the United Kingdom are warning of a possible recession, putting pressure on the Bank of England (BOE) to strike a compromise between containing inflation and protecting growth. The BOE is largely likely to raise interest rates again on Thursday, and money markets anticipate more hikes at each meeting this year, causing even more agony for borrowers. In other news, the FTSE 100 finished the month of April 0.5% higher, in line with its European peers. Due to the bank holiday in England, the markets remained closed today.

  • Monday 05/02/2022 - S&P Global Manufacturing PMI (Apr)
  • Thursday  05/05/2022 - BOE monetary policy decision 
  • Friday  05/06/2022 - BOE Mann Speech

JPY

The Japanese Yen plunged 0.88% higher in the previous session against the greenback. The Yen benefited from the weak dollar as market sentiment strengthened as a result of the corporate earnings spree. Meanwhile, the Yen fell today as a result of a stronger greenback, as investors sought safe havens amid global growth fears and inflationary pressures. On the data front, Japan's consumer confidence index rose to 33.0 in April 2022, up from a 14-month low of 32.8 the previous month. The most recent reading is backed by an increase in employment perceptions following the government's decision to end the quasi-state of emergency in late March, owing to a decrease in new COVID-19 infections and increased immunizations. In addition, the Jibun Bank Japan Manufacturing PMI was revised higher to 53.5 in April 2022, up from a preliminary reading of 53.4 and a final reading of 54.1 a month earlier, owing to a drop in COVID-19 cases and a relaxation of pandemic restrictions. Elsewhere, the Nikkei 225 Index fell 0.1% on Monday, while the wider Topix Index fell 0.07% after making big gains in the previous session.

  • Monday 05/02/2022 - Jibun bank Manufacturing PMI (Apr) ¦ Consumer Confidence Index (Apr) 
  • Thursday  05/05/2022 - Tokyo Consumer Price Index (Apr) 

CAD

The Loonie closed 0.31% lower in the previous session before extending its losses on Monday morning. The commodity-linked Loonie is weakening due to fears about global growth and inflation, which is causing safe-haven flows and supporting the greenback. Meanwhile, Canada's economy extended its string of monthly growth, with preliminary statistics showing the expansion outperformed expectations in the first quarter, reinforcing the Bank of Canada's aggressive rate-hiking strategy. In March, the gross domestic product increased 0.5%, recording gains for the tenth time in a row. The economy is on course to grow by nearly double the Bank of Canada's latest forecast for the first quarter, which was 3% annualized just two weeks ago. Having said that, investors in overnight swaps are fully pricing in a 50-basis-point hike at the next policy decision due on June 1, followed by a series of further hikes that will lift the benchmark interest rate as high as 3% by the end of the year.

  • Monday 05/02/2022 - S&P Global Manufacturing PMI (Apr)
  • Tuesday 05/03/2022 - BOC Rogers Speech
  • Wednesday  05/04/2022 - International Merchandise Trade (Apr) 
  • Friday  05/06/2022 - Unemployment rate (Apr) ¦ Net change in unemployment (Apr)

MXN

The Mexican Peso closed 0.09% higher in the previous session before losing its pace on Monday morning amid a cautious market mood. Meanwhile, the Mexican economy grew 0.9% year on year in the first three months of 2022, following a flat reading the previous quarter and falling short of market estimates of a 1.1% growth. According to preliminary estimates, the primary sector contracted by 1.9%, while the manufacturing and services sectors gained by 1.1%. Mexico's outcome comes after the United States' economy dropped for the first time since 2020 during the same month, with GDP contracting at a 1.4% annualized rate. Elsewhere, economists believe that the Mexican economy is still not out of the woods, with activity remaining sluggish as a result of intractable security issues, some uncertainty over President Andres Manuel Lopez Obrador's constitutional reform agenda, and ongoing risks from Covid-19 and Russia's invasion of Ukraine.

  • Wednesday  05/04/2022 - Consumer Confidence (Apr) 

CNY

The Chinese Yuan closed 0.13% lower in the previous session against the greenback. The Yuan fell another 1% roughly against the U.S. dollar on Monday, following a month of significant losses, as traders analyzed data showing factory activity in China declined for the second month in a row to its lowest level since February 2020 due to Covid lockdowns. Having said that, the Caixin China General Manufacturing PMI fell to a 26-month low of 46.0 in April 2022, down from 48.1 in March, and fell short of market expectations set at 47.0. The latest data showed the third decrease in factory activity since the beginning of the year, as COVID-19 outbreaks weighed on the economy. Meanwhile, the Chinese economy remains hobbled by Covid worries and is looking for policy softening measures, which contrasts sharply with the U.S. Federal Reserve. In other news, China's central bank announced a reduction in the reserve requirement ratio for foreign currency deposits to 8% from 9% beginning May 15, in an effort to maintain a swiftly sinking Yuan and boost the economy.

  • Thursday  05/05/2022 - Caixin Service PMI (Apr)

BRL

Some analysts already commented that the corrective movement that led the currency to record its best level since the pandemic may be losing steam. The Real weakening of more than 7% in the last three sessions is the evidence that reinforces this comment. Meanwhile, the average of polls for voting intentions in the last month showed the growth of President Jair Bolsonaro. From the beginning of the year, Bolsonaro grew 6% and Lula lost 1%. Looking at the current numbers, it would be premature to say that the movement will continue at the same speed, however, it is clear that the two main pre-candidates will try to increase their electoral slices and continue crushing the space for the third way. Elsewhere, Oil prices have fallen since the March 16 Copom meeting, as the central bank expected. But current and expected inflation has increased and several risks emerged, including new lockdowns in China. However, the market still expects the Central Bank to raise the Selic by 100 basis points to 12.75% at its next two-day meeting that begins tomorrow.

  • Monday 05/02/2022 - S&P Global Manufacturing PMI (Apr) ¦ Trade Balance (Apr) ¦  Nominal Budget Balances (Feb) 
  • Tuesday 05/03/2022 - Industrial Output (Mar) 
  • Wednesday  05/04/2022 - Fipe IPC inflation (Apr) ¦ Interest rate decision 
 

Want the Daily Market Pulse delivered straight to your inbox?

Sign up for a free account

Sign up for a free account

Access our convenient and secure online platform to process your international payments. Manage beneficiaries and view payment status and history at the click of a button.

Find out more
FX business solutions

FX business solutions

We provide tailored services to help companies make international payments and manage their foreign exchange risk

Find out more