Daily Market Pulse

Dollar climbs to highest levels in two decades

USD

After a 0.63% gain on Friday, the U.S. dollar index edged higher on Monday morning, approaching a 20-year high achieved in July, supported by predictions that the Federal Reserve will continue its hawkish stance to reduce inflation. Last week, St. Louis Fed President James Bullard stated that he is considering backing a third straight 75-basis-point rate hike in September but is not ready to declare that the economy has seen the worst inflation surge. Nevertheless, markets are pricing a higher possibility of a more modest 50 basis point rate hike in September. Traders are now anticipating Fed Chair Jerome Powell's address at this week's annual Jackson Hole conference for further clues on the central bank's rate hike plan.

  • Monday  08/22/2022 - Chicago Fed National Activity Index (Jul)
  • Tuesday 08/23/2022 - S&P Global PMIs (Aug)
  • Wednesday 08/24/2022 -  Durable Goods Orders (Jul)
  • Thursday 08/25/2022  - GDP Q2 (PREL) | Jackson Hole Symposium
  • Friday 08/26/2022 - Powell’s speech

EUR

The Euro remains in a downtrend on Monday morning after closing 0.43% down in the previous session. As a result, the common currency briefly crossed the critical $1 dollar mark again as the German recession seemed more plausible. Natural gas prices are approaching €300 per megawatt-hour after Russia's state-owned energy exporter Gazprom announced a three-day maintenance shutdown of the Nord Stream natural-gas pipeline to Germany. Furthermore, the flash August Global S&P PMI is projected to reveal that manufacturing activity in Europe's largest economy declined at the highest rate since May 2020. Investors still expect the European Central Bank's monetary policy meeting on Thursday to induce hawkish queues.

  • Tuesday 08/23/2022 - S&P Global PMIs (Aug)
  • Thursday 08/25/2022  - ECB Monetary Policy Meeting Accounts

GBP

The British Pound is seen falling more this morning after it plummeted 0.83% on Friday amid hawkish Fed fears and domestic inflation concerns. The impact of rising expenses on U.K. households and sluggish growth sustained pressure on the Pound. Furthermore, the economic consequences of massive rail sector strikes may have kept the currency capped on the upside. Going forward, August's PMI readings for the U.K.'s services sector are expected to be dismal on Tuesday, which may heighten concerns about a slowdown in the country's private sectors. In turn, the GBP could fall even more. Furthermore, retail sales figures this week are expected to struggle in the face of rising price inflation.

  • Tuesday 08/23/2022 - S&P Global PMIs (Aug)

JPY

In today's session, the Japanese Yen fell to a four-week low as policy divergence, and the interest rate difference between Japan and the United States widened. The Bank of Japan has repeatedly stated that it will maintain ultra-low interest rates, even as the U.S. Federal Reserve has indicated a commitment to more robust policies to combat excessive inflation. According to recent data, Japan's annual inflation rate increased to an 8-year high of 2.6% in July, up from 2.4% in June. Meanwhile, core consumer prices have remained above the central bank's 2% target for the fourth month. On the Covid front, 55% of Japanese respondents disapproved of the government's handling of the situation. Elsewhere, Prime Minister Fumio Kishida tested positive for the coronavirus on Sunday.

  • Tuesday 08/23/2022 - Jibun Bank PMIs (Aug)
  • Thursday 08/25/2022  - Tokyo CPI (Aug)

CAD

The strong U.S. dollar pressurizes the Canadian dollar. It closed 0.25% down on Friday before continuing its decline earlier today. The Federal Reserve is committed to keeping raising interest rates until inflation falls significantly weakens the Loonie. Domestically, Retail sales in Canada likely fell by 2% month-over-month in July of 2022, preliminary estimates showed. In other news, the Bank of Canada is anticipated to continue aggressively tightening monetary conditions. While headline inflation fell for the first time in almost a year, the central bank's average of three core readings rose to 5.3% from 5.2% the previous month.

  • Monday  08/22/2022 - New Housing Price Index (Jul) 

MXN

The Mexican peso fell for the fourth day on Friday (closed0.11% lower) as the U.S. dollar rose to a one-month high on rising U.S. yields. Domestically, three Banxico meetings are anticipated for September, November, and December, with a 50 basis point rate hike next month completely priced in. Furthermore, Citigroup analysts advise customers to keep Pemex bonds due in 2027 and 2029 since those in the belly of the curve may drop further when new issuance is digested. Investors anticipate publishing essential data this week, including half-month inflation, growth figures, and trade balance statistics.

  • Wednesday 08/24/2022 -  Half Month Inflation (Aug)
  • Thursday 08/25/2022  - GDP Q2 
  • Friday 08/26/2022 - Trade Balance (Jul)

CNY

The Yuan fell to its lowest level in nearly two years versus the dollar. China provided further easing measures to counter an economic downturn when the U.S. Federal Reserve reaffirmed its resolve to fight inflation with aggressive interest rate hikes. In today's monthly meeting, the People's Bank of China cut the one-year loan prime rate (LPR) by five basis points to 3.65%, while 15 basis points cut the five-year LPR to 4.3%. Along with widening policy divergence, China's economy continues to be hampered by the country's zero-Covid strategy, property sector troubles, and power shortages in manufacturing regions, boosting the risks of increased capital outflows and Yuan depreciation.

  • Monday  08/22/2022 - PBoC Interest Rate Decision

BRL

BRL – The Brazilian currency closed with a slight loss the last Friday. The electoral race and the abroad market externals continue to be the main elements of the market narrative. The election campaign started last week, and the rivalry between the primary candidates remained strongly polarized. Several polls of intention to vote were released last week, showing the candidates are nearing each other with Lula (44%) and president Bolsonaro (35%). Meanwhile, the market to act cautiously awaits Fed leaders, including Jerome Powell, at the annual Jackson Hole, which takes place on Thursday and Friday. It is expected that the comments move the markets with intensity. On the domestic front, the IPCA-15 is the leading data to be monitored this week, with deflation expectations in the first half of August.

  • Monday  08/22/2022 -  Focus Bulletin
  • Wednesday  08/24/2022 - IPCA-15 (Monthly) (Aug)
  • Thursday  08/25/2022  - CAGED Employment Evolution Index (Jul)
  • Friday  08/26/2022 - Foreign Direct Investment (USD) (Apr)
 

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