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Dollar gains partly, awaits Powell speech

USD

The U.S. dollar index, which measures the greenback's performance against a basket of six major currencies, sharply declined by 0.71% on Friday’s closing followed by a modest comeback during Monday's session. The losses in the past week were due to a cautious market mood, triggered by the new Coronavirus variant, and by the fall of U.S. Treasury yields by 9.4% on Friday. However, the dollar regained some ground partly on the first day of the new week amidst cautiousness following the discovery of the Omicron variant of the virus. Economists believe that the uptick in the greenback will not take longer against the Covid backdrop as it is holding the ground tightly due to earlier rate hike expectations, rising yields, high inflation, and a faster pace of tapering chatter. Market participants, in the latter part of the day, will be waiting for pending home sales data and Dallas Fed manufacturing index, along with a speech from chairman Powell and FOMC’s permanent voters R. Clarida, J. Williams, and M. Bowman. 

  • On Monday 11/29: Pending Home Sales ¦ Dallas Fed Manufacturing Business Index ¦ Fed Chair Powell Speech ¦ Fed’s Bowman speech
  • On Tuesday 11/30: Redbook index ¦ Housing Price Index ¦ Consumer Confidence ¦ Fed’s Chair Powell Speech ¦ Fed’s Clarida Speech
  • On Wednesday 12/01: ADP Employment Change ¦ Markit Manufacturing PMI ¦ Construction Spending ¦ ISM Manufacturing Employment Index ¦ Fed’s Beige Book
  • On Thursday 12/02: Challenger Job Cuts ¦ Continuing Jobless Claims ¦ Initial Jobless Claims
  • On Friday 12/03: Nonfarm Payrolls ¦ Unemployment Rate ¦ Markit PMI Composite ¦ ISM Services PMI ¦ Average Hourly hours

EUR

The Euro gained 0.96 % against the greenback on last week’s closing, followed by it erasing its two consecutive days' worth of gains in the wake of the European trading session. The reversal on Friday's optimism is driven by a recovery in the dollar strength as investors favor safety over rising uncertainty, following the discovery of the Omicron variant in South Africa. European Central Bank’s vice president Luis de Guindos mentioned on Monday that the most worrying factor for the Eurozone, for now, is inflation. Moving forward, the European Commission will publish the final consumer confidence index for November followed by preliminary inflation figures in Germany. In addition to this, ECB’s chairwoman Lagarde’s speech is due in Turin, followed by speeches by board members A. Enria, I. Schnabel, P. Hakkarainen, and L. De Guindos. 

  • On Monday 11/29: ECB President Lagarde Speech ¦ Business Climate ¦ Consumer Confidence ¦ Economic Sentiment ¦ Industrial Confidence ¦ Services Sentiment
  • On Tuesday 11/30: Consumer Price Index Core ¦ Consumer Price Index  
  • On Wednesday 12/01: Non-monetary policy ECB meeting ¦ Markit Manufacturing PMI
  • On Thursday 12/02: Producer Price Index ¦ Unemployment Rate
  • On Friday 12/03: Markit PMI Composite ¦ Markit Services PMI ¦ Retail Sales

GBP

The Sterling retreated 0.11% against the greenback during last week’s closing, followed by it extending its downside modestly as it entered Monday's session. Economists believe that the downside is heavier for the Cable due to the latest Omicron variant and Brexit woes. On the Brexit front, the European Commission's vice president Margaritis Schinas told Britain on Saturday that it has to sort out its migrant problem, post-Brexit, on its own. Also, weighing on this is the persistent tensions over French-UK fishing rights. Looking ahead, due to the light economic calendar for the UK, the Omicron variant updates and Brexit-related headlines will provide fresh momentum for Sterling. 

  • On Monday 11/29: Consumer Credit ¦ Mortgage Approvals ¦ Net Lending to Individuals
  • On Wednesday 12/01: Nationwide Housing Prices ¦ Markit Manufacturing PMI ¦ BoE’s Governor Bailey Speech
  • On Friday 12/03: Markit Services PMI

JPY

The Japanese Yen gained a whopping 1.72% against the U.S. dollar on Friday’s closing, indicating the heaviest fall for the USD/JPY pair in 20 months. The Yen gained upbeat traction due to the decline in the greenback as well as global markets, owed by the new virus variant called Omicron. In Japan, Prime minister Kishida blocked the borders for foreign arrivals from South Africa and eight other nations. On the same note, Bank of Japan’s Governor Karuda’s optimistic comments about combating Covid and economic recovery also helped to add further strength to the Yen. Japan’s retail trade eased at 0.9%, against expectations of 1.1%. Market participants are now awaiting a speech from U.S. President Joe Biden on the new Covid variant, as well as comments from Fed’s chairman Powell, to provide fresh impetus to the currency pair. 

  • On Monday 11/29: BoJ Kuroda Speech ¦ Unemployment Rate ¦ Industrial Production
  • On Tuesday 11/30: Annualized Housing Starts ¦ Construction Orders Housing Starts ¦ Capital Spending
  • On Wednesday 12/01: Jibun Bank Manufacturing PMI ¦ Foreign Bond Investment ¦ Foreign Investment in Japan Stocks
  • On Thursday 12/02: Consumer Confidence
  • On Friday 12/03: Jibun Bank Services PMI

CAD

The Loonie suffered 1.13% against the greenback on last week's closing. Furthermore, it continued to rebound from last week’s low modestly on the first day of this new week. Crude oil prices surged sharply on Monday, providing strength for the Loonie against the greenback. A good-ish pickup in U.S. yields provided a downside cushion for the U.S. dollar. Investors are reassessing the Fed’s prospects of early policy tightening, which holds back bullish bets on the greenback and provides an opportunity for the Loonie to advance. Monday’s economic data releases include pending home sales data, which might provide little impetus. The focus is on developments around the new Coronavirus variant. Market participants will take cues from oil prices and broader market sentiment to find short-term trading opportunities across the day. 

  • On Monday 11/29: Current Account ¦ BoC Governor Macklem Speech ¦ BoC Schembri Speech
  • On Tuesday 11/30: Gross Domestic Product
  • On Wednesday 12/01: Building Permits ¦ Markit Manufacturing PMI
  • On Friday 12/03: Labor Productivity ¦ Net Change in Employment ¦ Participation Rate ¦ Unemployment Rate 

MXN

The Mexican Peso declined 1.65% against the U.S. dollar on Friday's closing. The USD/MXN pair peaked during the Asian session today, the highest since September 2020. Negative market sentiments are putting global financial markets in turmoil by the new virus variant, triggering a sharp fall of currencies in emerging markets. Additionally, in the same line, domestic factors in Mexico provide a headwind for the Peso, as the change in nomination for head of Bank of Mexico further weakened the Peso last week. The U.S. dollar has surged almost 5% against the Mexican Peso in the last five years, and the rally is expected to post the highest close in more than a year. The rally of the greenback is anticipated to advance further if market conditions remain negative. 

  • On Monday 11/29: Jobless Rate
  • On Tuesday 11/30: Fiscal Balance 

CNY

The Chinese Yuan declined by 0.11% against its counterpart dollar at the closing of last week’s session. The Yuan advanced 0.12% during the early hours of Monday’s session as market participants assess the danger of the new Omicron variant in global markets. The greenback suffers selling pressure as markets are less fearful of Omicron after reports over the weekend that the symptoms are mild, which helped the Yuan to hold its current gains. This week, we expect NBS manufacturing PMI and Non-manufacturing readings to be released tomorrow, followed by Caixin Manufacturing PMI reading on Wednesday and Caixin Services to close out the week on Friday.

  • Tuesday 11/30: NBS manufacturing index(Nov) ¦ Non-manufacturing PMI (Nov) 
  • Wednesday 12/01: Caixin Manufacturing PMI (Nov)
  • Friday 12/03: Caixin services PMI (Nov)

BRL

The Brazilian Real suffered 0.72% against the greenback on Friday's closing. The losses come amid fears that the new Ômicron variant could dampen the recovery in the global economy. However, in the accumulated result for the week, the drop was limited to 0.26%. On the new virus strain front, the Federal government has decided to restrict the arrival of passengers coming from some African countries in an attempt to minimize the spread. The decision shows agility and government maturity in adopting the measure without infertile debates. Additionally, the Federal government hopes that the PEC dos Precatório will be voted on tomorrow in the Senate Constitution and Justice Committee (CCJ). According to the government, the proposal will create fiscal space for the payment of Auxílio Brasil through the change in the calculation of the spending ceiling and a new regime for the payment of court orders. But one of the main causes of the resistance faced by the text in the Senate is the absence of specification of the destination of the remaining amount after payment of the aid. On this week's macroeconomic radar, the highlight will be the release of the GDP for the third quarter (12/02), where GDP is expected to follow a stagnant or show a retraction pattern. With that, we may have the possibility of a technical recession, which is characterized by two consecutive quarters of GDP contracting. Later this week, there will be IGP-M data for November, data on the labor market, and the results of the trade balance.

  • Monday 11/29: IGP-M (Nov) –Focus Bulletin / Employment Evolution Index of CAGED (Out) -
  • Tuesday 11/30: Unemployment Rate / Net Debt / GDP (Oct)  / Balance Sheet Budget (Oct) - Average / Budget Surplus (Oct) 
  • Wednesday 12/01: IPP (Oct)/ Industrial PMI Markit (Nov) –Trade Balance (Nov)
  • Thursday 12/02: IPC-Fipe (Nov) / GDP (Q3)
  • Friday 12/03: Industrial Production (Oct) - Markit Service Sector PMI (Nov) 

Quick Insights

USD: Dollar gains partly, and awaits Powell speech

USD: Dollar gains partly, and awaits Powell speech

EUR: Euro declines amid dollar recovery, awaits ECB speech

EUR: Euro declines amid dollar recovery, awaits ECB speech

GBP: Sterling down amid new virus strain concerns

GBP: Sterling down amid new virus strain concerns

JPY: Yen surges on positive expectations

JPY: Yen surges on positive expectations

CAD: Loonie rise amid surging oil prices

CAD: Loonie rise amid surging oil prices

MXN: Peso extends to slide amid market turmoil

MXN: Peso extends to slide amid market turmoil

CNY: Yuan advances amid market sentiments

CNY: Yuan advances amid market sentiments

BRL: Real fall on global markets dampening

BRL: Real fall on global markets dampening

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