Daily Market Pulse

Stronger than expected U.S Markit PMI data

5 minute read


USD strengthened 0.20% against all of its G-10 peers following the release of more upbeat than expected U.S Markit PMI data. The flash of the U.S Manufacturing PMI unexpectedly rose to a 74-month high level of 56.7 and Services PMI increased to 57.7 – a 68-month high – from 56.9 previous. Meanwhile, a strong rebound in the U.S Treasury bond yields was seen, providing some additional support to the USD. In a quiet day for economic data, investors will wait for the Fed Minutes tomorrow, which may largely reinforce dovish forward guidance as Chairman Jerome Powell “committed to using our full range of tools to support the economy,”. Moreover, news that the US President-elect Joe Biden's administration was given the go-ahead by the General Services Administration to formally begin its transition process added to an already upbeat market mood.


The EUR closed down 0.21% against the greenback in a volatile trading session on Monday after the release of significantly more upbeat than expected U.S Markit Composite PMI data. At the same time, the flash Markit Composite PMI for the Eurozone slumped from 50.0 in October to 45.1 in November, its lowest since May. The deteriorating performance was broad-based, albeit with the service sector hardest hit from Covid-19 containment measures. Meanwhile, news from the phase three trial of AstraZeneca/Oxford University’s Covid-19 candidate, which is as much as 90% effective, did not draw the market’s attention. Today, investors will wait for Germany’s GDP release.


The British pound printed modest gains (+0.15%) against the USD on Monday as expectations raised that a Brexit deal is only just around the corner, although key issues like fisheries, governance, and competition remain unsolved. There are rumors of an announcement in the next few days. The news overshadowed weak services and manufacturing PMI data. The IHS Markit/CIPS UK Services PMI dropped to 45.8 in November 2020, from 51.4 in the previous month, while Manufacturing PMI jumped to 55.2 in November of 2020 from 53.7 in October. Furthermore, less talk of negative rates from the Bank of England combined with more fiscal stimulus from the U.K. government has also provided support to the GBP.


Japan was closed for a national holiday on Monday. The Japanese economic calendar is empty of any material data, leaving risk sentiment and minutes of the U.S Federal Open Market Committee (FOMC) driving the JPY direction. Technically, the pair USD/JPY continues its prolonged, orderly, and slow technical descent as the JPY is favored by modest safety-trade.


The CAD was almost flat (-0.05%) against the USD while Canadian stocks clawed back Covid-19 pandemic losses on Monday. Seven months after starting a bull market rally, Canada’s stock market finally erased the last of its pandemic-driven losses, with the S&P/TSX Composite Index climbing 0.3% on Monday. Comments from Bank of Canada (BoC) Deputy Governor Gravelle did not stimulate any reaction in the Loonie. He underplayed BoC’s concern regarding financial stability in Canada but insisted that if the market stress returns, the BoC could help again with asset purchase programs and liquidity facilities. The CAD should receive some support after decent gains seen in the oil market. Today, the BoC Deputy Governor Wilkins is set to speak at the International Monetary Fund event.


The MXN dropped slightly 0.35% against the USD after reaching its strongest intraday level in nearly eight months. The Mexican peso remains supported by the relatively higher interest rates and also by the favorable outlook for global oil markets after the Covid-19 vaccines raised hopes for a recovery in oil demand. West Texas Intermediate crude futures gained as much as 2.2% on the vaccine news, to $43.36 per barrel. In the absence of domestic data, the Mexico/US interest rate differential and oil market, both remain the major market movers.


The Chinese yuan slid 0.37% against the greenback on Monday, with investors eagerly waiting for China’s industrial profits on Thursday.  Meanwhile, the CNY remains supported by a rally in Chinese yuan-denominated bonds and shares which has accelerated within the wake of the US presidential election. Chinese bond yields increased more than those in developed markets and encouraged demand from debt investors, hence increasing passive fund flows.


The Brazilian real fell 1.10% against the USD on Monday with the investor’s discomfort over Brazil's fiscal situation weighing on the BRL, despite hopes regarding the development of a vaccine for Covid-19. Market participants also watched the Economy Minister Paulo Guedes speaking at the International Chamber of Commerce Brazil, where Mr. Guedes once more adopted an optimistic tone as to Brazilian economic recovery in the face of the Covid-19 crisis and defended the continuity of the government’s reform agenda. Meanwhile, after struggling for months to get its spiraling Covid-19 death toll under control, the rolling average has now risen above 400 and there is also a worrying trend in the number of hospitalizations. Fundação Getúlio Vargas (FGV) Consumer confidence is expected to be released later today.


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