Daily Market Pulse

Dollar hits one month low

USD

The U.S. dollar index slid on Friday to its lowest level in a month, after finishing 0.20% lower yesterday as investors evaluated expectations for future Fed rate hikes amid signals the central bank may stall or perhaps halt its tightening cycle later this year. Also, the dollar fell alongside Treasury yields after a recent deterioration in U.S. economic statistics and business profits prompted concerns about a slowing economy. According to the most recent figures, the U.S. economy contracted an annualized 1.5% per quarter in the first three months of 2022, somewhat worse than original predictions of a 1.4% contraction, with trade being the main drag. Way ahead, the U.S. Personal Consumption Expenditures (PCE) Price Index data, the Fed's favored gauge of inflation, will be released later in the day. 

EUR

The common currency took advantage of the dollar's selling pressure and surged to its highest level in a month, closing 0.41% higher on Thursday. The Euro appears to maintain its strength and is on course to end the week in positive territory for the second week in a row. The positive momentum is apparent as the European Central Bank stated that negative monetary policy is coming to an end. Meanwhile, in France, the nuclear breakdowns at Electricite de France SA are sending shockwaves across European energy markets, threatening to derail the continent's attempt to wean itself off Russian gas. In other news, European stocks are set to be on track for their greatest weekly gain since mid-March.

GBP

The British Pound gained 0.21% on Thursday and extends its bullish trend on Friday. The continued uptrend Is the result of the new Support package that aims to boost consumer spending. Chancellor Rishi Sunak unveiled a new £15 billion support package aimed at millions of low-income households, bringing the total cost of living support this year to £37 billion. The package includes a new temporary Energy Profits Levy on oil and gas companies, which is projected to raise roughly £5 billion over the next year to help with living costs. Britons have been dealing with inflation at 40-year highs, and the most recent data pointed to recession risk, leaving the Bank of England with less room to boost rates further. 

JPY

The Japanese Yen advanced 0.16% before consolidating its gains this morning against the greenback. In the latest updates, the yield on Japan's 10-year government bond rose from a seven-week low to 0.238% as traders digested highly anticipated U.S. Fed minutes. With Japan's headline inflation rate exceeding the target for the first time in seven years, Kishida's government urged the central bank to keep it there in a sustainable manner in its latest long-term policy outline, a shift from previous calls for the central bank to maintain the ultra-easy monetary policy to achieve the target inflation rate. In other news, the Nikkei 225 surged 0.66% on Friday, while the wider Topix Index advanced 0.52%, tracking a broad overnight rally on Wall Street, with chip-related and commodity companies leading the market higher.

CAD

The Loonie managed to extend its profits by closing 0.34% higher in the previous session and continued to nudge higher this morning against its U.S. counterpart.  In the data releases, the CFIB's Business Barometer long-term index in Canada declined by 3.3 points to 61.6 in May 2022, indicating a moderation in confidence about the 12-month business outlook to the lowest level since last January. Also, preliminary projections predict that retail sales in Canada will likely increase by 0.8% month over month in April 2022. In March, retail commerce was unchanged from the previous month, despite preliminary expectations of a 1.4% increase and an upwardly revised 0.2% gain in the prior month. In other news, Canada's S&P/TSX finished 0.7% higher on Thursday, surging for the fifth consecutive session to reach three-week highs with help from the technology and healthcare sectors. 

MXN

The Mexican Peso continues to capitalize on dollar weakness today after finishing Thursday's session with 0.32% gains. The current strength stems from the Mexican economy's robust performance for the first quarter, where it marginally avoided falling into the recession late last year. According to experts, Mexico's recovery from the epidemic was incomplete and inconsistent in the first quarter. Rising interest rates and weakening U.S. GDP are creating additional difficulties. The government's nationalist rhetoric is a hindrance. Economic activity is anticipated to gradually increase this year, but stay below pre-pandemic levels and potential.

CNY

The Chinese Yuan closed 0.71% lower against the greenback in the previous session. The Yuan strengthened against a weaker dollar on Friday, after swinging rapidly between gains and losses, and was set for a weekly decrease versus the greenback. Meanwhile, profits made by China's industrial businesses climbed by 3.5% year on year to CNY 26.58 trillion in January-April 2022, falling dramatically from an 8.5% growth the previous quarter, due to increasing raw material prices and supply chain turmoil caused by the Ukraine crisis. In other news, the Shanghai Composite increased 0.23% while the Shenzhen Component fell 0.12% in choppy activity on Friday, following statistics indicating that China's industrial sector's profitability fell in April, indicating the negative impact of Covid lockdowns on enterprises.

BRL

After trading steadily for the last three sessions, the Brazilian currency saw a firm appreciation of 0.91%. External relief came after weaker data from the North American economic docket, which prompted the Fed would not need to become even more aggressive to tame inflation. Meanwhile, this Friday, investors and operators must react to the latest Datafolha poll, that showed former President Lula is extending his advantage over the incumbent Jair Bolsonaro to 21 percentage points in the first round and to 25 points in the second round. Lula has 48% of voting intentions in the first shift and Bolsonaro has 27%. In the second round, Lula appears with 58% and Bolsonaro with 33%. Elsewhere, the Ministry of Economy is still in favor of granting subsidies to help truckers bear higher prices diesel prices, which would cost the government another 1.5 billion Reais this year, informed the local media. The government is also discussing the extension of aid to taxi drivers and Uber-like apps.

 

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