Daily Market Pulse

Dollar set to hit fresh highs in two decades

USD

Following a surge of 1.75% on Friday, the U.S. door index is on course to set a new two-decade high on Monday. Risk aversion, hawkish Fed comments, and rising U.S. Treasury bond yields all contribute to the dollar's strong performance. The dollar rose to an all-time high against the Pound as the UK's new administration proposed huge tax cuts supported by the highest government borrowing since 1972. It has also reached two-decade highs against the Euro and more than two-year highs against antipodean currencies. Loretta Mester, President of the Federal Reserve Bank of Cleveland, and Lorie Logan, President of the Federal Reserve Bank of Dallas, are slated to speak later in the day.

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  • Monday  09/26/2022 - Chicago Fed National Activity Index (Aug)
  • Tuesday 09/27/2022 - Durable goods (Aug) | Housing Price Index (Jul) | Consumer Confidence (Sep) 
  • Wednesday 09/28/2022 - Fed Chair Powell’s Speech
  • Thursday 09/29/2022  -  GDP Q2
  • Friday 09/30/2022 - PCE (Aug) | Michigan Consumer Sentiment Index (Sep)

EUR

The Euro drifts lower starting the new week, hovering around its weakest level since June 2002, as recession fears mounted and as investors digested Italy's election results. According to economic data released on Friday, the Eurozone's business activity declined for the third consecutive month in September and is expected to fall further in the coming months. At the same time, European Central Bank policymakers have indicated that they will continue to fight for higher interest rates this year and next in order to combat inflation, despite the region's economic slowdown. On the political front, Italy elected its most right-wing leader since World War II on Sunday. The European Economic Docket will include a speech by ECB President Lagarde and the German IFO confidence poll.

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  • Monday  09/26/2022 - ECB Lagarde Speech
  • Tuesday 09/27/2022 - ECB Lagarde Speech
  • Wednesday 09/28/2022 - ECB Lagarde Speech
  • Thursday 09/29/2022  -  Business Climate and Consumer Confidence (Sep)
  • Friday 09/30/2022 - HICP (Sep) | Unemployment Rate (Aug)

GBP

The Pound sank almost 5% at one point during Asian trading hours today, as the UK finance minister stated over the weekend that there is "more to come" in terms of tax cuts. As a result, the yield on Britain's ten-year gilt went above 4.2% for the first time since 2010, as traders increased bets on the extent of interest rate hikes by the Bank of England amid ongoing concerns about the government's legitimacy and confusion over how the new mini-budget will be financed. Money markets are now pricing in a 25 basis point increase in emergency rates this week and a nearly 150 basis point increase by the November meeting. In other news, the UK Debt Management Office said that it was increasing its debt issuance plans for the current fiscal year by GBP 72.4 billion to reflect the cash needed for all of the incoming finance minister's proposals.

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  • Monday  09/26/2022 - BOE Tenreyro Speech
  • Friday 09/30/2022 - GDP Q2

JPY

The Japanese yen plummeted against the dollar Monday, returning to its lowest levels in 24 years after falling 0.64% on Friday. Uncertainty about Japan's economic future was growing, with recent monetary tightening by major central banks hurting global development, according to Bank of Japan Governor Haruhiko Kuroda. He also added that "We must be cognizant of the reality that downside risks are substantial," and mentioned that the central bank would maintain an ultra-loose monetary policy to assist the economy. Regarding pricing, Kuroda stated that the impact of global inflation has spread to Japan. Current price increases in the country are more likely to be the result of high costs, which are mostly the effect of high commodity prices and currency depreciation rather than an increase in domestic demand.

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  • Monday  09/26/2022 - BOJ Kuroda Speech
  • Wednesday 09/28/2022 - BOJ Policy Meeting Minutes
  • Thursday 09/29/2022  -  Business Climate and Consumer Confidence (Sep)
  • Friday 09/30/2022 - Unemployment Rate (Aug) | Industrial Production (Aug) | Retail Trade (Aug)

CAD

The Canadian currency drops further this morning after falling 0.78% on Friday amid broad dollar strength. In the most recent developments, the risk-off mood skyrocketed as recession fears fueled by the prospect of aggressive tightening by major central banks led to a global equities sell-off. Concerns about poor demand pushed crude oil prices to January lows, while widespread selling of gold and other bullion assets contributed to the Loonie's decline. In other news, Stats Canada reported a CAD 3.9 billion federal budget surplus in July 2022, compared to a CAD 10.9 billion deficit in the same month the previous year. Finally, Investors digested July retail sales data, which showed that Canadian retail turnover fell by the most in a month since April 2021.

  • Thursday 09/29/2022  - GDP (Jul)

MXN

The Mexican Peso plummeted (1.32%) for the third time in four days on Friday as a selloff in global risk assets intensified, putting pressure on emerging-market currencies. Mexico's swap rates extend their weekly gains as U.S. yields rise and the Peso falls. The TIIE curve anticipates 190 basis points of rate hikes for the remainder of 2022, bringing the policy rate to 10.40% by year's end. Domestically, investors expect the Bank of Mexico to follow the Federal Reserve's lead and raise its benchmark interest rate by 75 basis points at its meeting next week, tying its 2005 high of 9.25%.  In other news, President Andres Manuel Lopez Obrador stated at a Friday press conference that he met with store executives and agricultural producers to set the price of the basic basket of products in order to combat inflation.

  • Tuesday 09/27/2022 - Jobless Rate (Aug) | Trade Balance (Aug) 
  • Thursday 09/29/2022  - Central Bank Interest Rate

CNY

The Chinese Yuan has fallen 0.5% against the U.S. dollar today, reflecting the cautious market sentiment. Today, the People's Bank of China (PBOC) announced that beginning on September 28, it will increase the foreign exchange risk reserves for financial institutions when purchasing FX through currency forwards from zero to 20%. Since 2020, the reserve ratio has been zero. The statement on Monday is the latest policy measure to stabilize the currency after the PBOC said earlier this month that it would reduce the amount of foreign currency that banking institutions must retain as reserves. Investors are anticipating a spate of Chinese economic data this week, which will shed light on how well the economy has recovered from Covid lockdowns.

  • Friday 09/30/2022 - NBS Manufacturing PMI (Sep) | Non-Manufacturing PMI (Sep) | Caixin Manufacturing PMI (Sep)

BRL

Last Friday, the Brazilian real fell 1.65% versus the US dollar, mirroring a gloomy sentiment throughout international markets amid fears of a worldwide recession fueled by aggressive rate hikes by major central banks. Energy and materials stocks led the slide in equity markets, falling 6.2% and 2.2%, respectively, as crude and other commodity prices fell. On the political front, according to a Datafolha poll released Thursday, Brazil's presidential contender Luiz Inacio Lula da Silva leads incumbent President Jair Bolsonaro by 14 points. Traders are now anticipating current account and mid-month inflation data during the week.

  • Monday  09/26/2022 - Current Account (May) | BCB Focus Bulletin 
  • Tuesday 09/27/2022 - Mid-Month Inflation (Sep) 
  • Thursday 09/29/2022  - Inflation Index (Sep) 
  • Friday 09/30/2022 - Unemployment Rate (Aug)
 

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