Daily Market Pulse

Dollar is king amid renewed Covid jitters

USD

The U.S. dollar index, a major indicator used to assess the performance of the greenback against a basket of six major currencies kicked off the week with a strong appreciation rallying 0.85% in the early hours of Monday. The broader risk-off sentiment is sponsored by renewed Covid jitters while market participants stay tuned to key upcoming readings to determine whether inflation has peaked and if stagflation may be close to an end. This week, durable goods orders will provide a solid indication of whether the economy is set to pick up growth as well as insight from the Fed policy meeting which will provide further data for policymakers to diggest ongoing uncertainty. Furthermore, as the festive season approaches Thanksgiving is due to take place on Thursday this week, and will likely affect the broader liquidity in financial markets.

  • Monday 21st November - Chicago Fed National Activity Index ¦ Fed’s Daly Speech
  • Tuesday 22nd November - Redbook Index ¦ Richmond Manufacturing Index ¦ API Weekly Crude Oil
  • Wednesday 23rd November - MBA Mortgage Applications ¦ Continuing Jobless Claims ¦ Durable Good Orders ¦ Nondefense Capital Good Orders ex Aircraft ¦ S&P PMI Composites ¦ Michigan Consumer Sentiment Index ¦ FOMC Minutes
  • Thursday 24th November - Thanksgiving

EUR

The EUR sustains pressure during early hours of Monday session against the U.S. dollar, retracing 0.75%. The broader risk-off sentiment weighs over risky assets as policymakers' narratives shift to a more aggressive tightening by the European Central Bank. Investors raised bets after ECB president Christine Lagarde commented last Friday that the central bank is committed to bringing down medium-term inflation to 2% in a timely fashion. Lagarde highlighted that the policy committee will have to continue raising rates to get inflation back under control. This week, market participants will stay tuned to Consumer Confidence readings for the bloc in addition to S&P global PMI composite later on the week. Additionally, Speeches from ECB members will drive the weekly narrative as well as ECB Monetary policy meeting accounts and German GDP figures towards the end of the week.

  • Tuesday 22nd November - Current Account ¦ Consumer Confidence 
  • Wednesday 23rd November - ECB De Guindos Speech ¦ S&P Global Compotes PMI 
  • Thursday 24th November - ECB De Guindos Speech ¦ ECB Monetary Policy Meeting Accounts 
  • Friday 25th November - Germany Gross Domestic Product (Q3)

GBP

The British Pound opened the week on the back foot, retracing 0.68% against the greenback amid a broader risk sentiment weighing over riskier assets due to renewed concerns of the return of Covid in China. Moreover, the debate over Brexit has reignited No. 10 Downing Street denied that the UK was considering pushing  for a Swiss-style relationship with the EU, alongside pressure from businesses to resolve tensions and adopt the UK’s immigration policy. This week will be rich on policymakers interventions with upcoming speeches of Cunliffe, Ramsden, Pill, and Mann throughout the week and with PMI reports as well.

  • Monday 21st November - BoE Cunliffe Speech 
  • Tuesday 22nd November - Public Sector Net Borrowing
  • Wednesday 23rd November - S&P Global PMI Composites ¦ BoE Pill Speech
  • Thursday 24th November - BoE Ramsden Speech ¦ BoE Pill Speech ¦ BoE Mann Speech

JPY

Renewed Covid concerns in China looms the market sentiment underpinning to greenback during early hours of the trading session. Economists suggest that the Bank of Japan may let go of its yield curve control in the next three to six months as inflation remains elevated, although it will be difficult to see a substantial change in trend if policymakers don’t adjust their approach. Coming up we see Labor thanksgiving day on Tuesday this week which might have impacted over-market liquidity. Moreover, the Tokyo CPI reading will provide solid insight into inflationary expectations in the country as well as the PMI reading towards the end of the week.

  • Tuesday 22nd November - Labor Thanksgiving Day
  • Thursday 24th November - Jibun Bank Manufacturing PMI ¦ Coincident Index ¦ Leading Economic Index ¦ Tokyo Consumer Price Index

CAD

Last week the Loonie edged lower by 0.34% against its US counterpart, as it was the worst performance among G10 currencies as oil prices slid. On that note, Oil was poised for a weekly loss of almost 8% as concerns over a softer demand outlook filtered through the market. Looking ahead, oil prices started the week on the wrong foot, as it is extending losses from last week’s recession fears. This morning, international benchmark Brent crude traded at $87.16 per barrel, a 0.45% decrease while WTI trades at $79.60 per barrel, a 0.54% decrease. The week ahead will bring Retail Sales on Tuesday and Payroll employment change on Thursday. Particularly,  for the Retail Sales numbers, it will likely contain a preliminary estimate of retail spending in October, which economists will use to gauge the extent to which the Bank of Canada's interest rate policy is.

  • Monday 21st November - Retail Sales (Sep) ¦ BoC Senior Deputy Governor Rogers Speaks 
  • Wednesday 23rd November - BoC Gov Mackem Speaks
  • Friday 25th November - Budget Balance (Sep)

MXN

The Peso finished the last week with small losses (-0.11%) against the greenback, but, overall the currency had a positive week as it has been strongly supported by the high-interest rate. Looking ahead, market expectations are towards speculation on monetary policy in the United States, where it is expected that the Federal Reserve will continue to raise the interest rate in 2023 to a level greater than 5%. On that note, market players will await the US FOMC minutes from November’s meeting, along with domestic data, including Retail Sales for September on Tuesday, Consumer Prices on Wednesday, and 3Q GDP figures on Thursday.

  • Monday 21st November - Bank Holiday Revolution Day
  • Tuesday 22nd November -  Retail Sales (Sep)
  • Thursday 24th November - 1st Half-Month CPI (Nov)
  • Friday 25th November - GDP Q3

CNY

The Chinese yuan gained 0.53% against the US dollar on Friday, but the currency kicked off the week giving back the recent gains, amid concern the latest Covid deaths may see a return of stricter restrictions. On Sunday, official authorities reported three Covid deaths over the weekend and the city reported 951 cases on a single day. The recent pessimistic numbers bring new doubts about whether China will be able to further ease its Covid-zero policy or normalize it. On the other hand, some of the biggest players in global markets, such as Bank of America, Morgan Stanley, and Franklin Templeton, are turning increasingly bullish on Chinese assets. This comes after China delivered a plan to rescue the beleaguered property market and dial back tensions with the west. Looking forward, market players will continue to monitor how Beijing will tweak Covid policies to minimize economic and social costs.

  • Monday 21st November - PBoC Loan Prime Rate
  • Friday 25th November - Chinese Industrial Profit (Oct)

BRL

Last week the BRL’s volatility increased substantially, with the currency posting strong gains and losses during the trading session. The main catalysts have been (1) the uncertainties generated by Lula’s statements regarding fiscal policy and; (2) the lack of indications about the composition of the economic team bringing economic instability. The week ahead will bring new developments on the political front, with political negotiations focused on the Transition PEC (which includes the 2023 Budget), the election of the House and Senate leadership positions, as well as the announcement of Lula’s ministers. The latter, If Lula follows the timeline of the announcement of his ministers from the 2002 election, the new ministers should start to be known by mid-December.

  • Monday 21st November - BCB Focus Market Readout
  • Thursday 24th November - FGV Consumer Confidence (Nov) ¦ BCB National Monetary Council Meeting ¦ Mid-Month CPI (Nov)
  • Friday 25th November: Current Account (Oct) ¦ FDI (Oct)
 

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