Daily Market Pulse

Dollar heads north amid high market volatility

USD

During the Asian trading hours on Monday, markets were relatively quiet, but volatility increased in the early European morning. After posting minor losses (0.12%)  on Friday, the U.S. dollar index regained amid the high market turbulence this morning. Meanwhile, investors are looking forward to U.S. manufacturing data and speeches from Federal Reserve officials, which will provide insight into the status of the world's largest economy and help shape the rate forecast. The dollar remains supported by the Fed's vigorous monetary tightening effort. Several FOMC policymakers, including Kansas City Fed President Esther George and New York Fed President John Williams, will offer speeches in the afternoon and provide fresh impetus.

  • Monday 3rd October - S&P and ISM Manufacturing PMI | Fed Policymakers Speeches
  • Tuesday 4th October - Factory Orders
  • Wednesday 5th October - ADP Employment Change | Trade Balance | S&P and ISM Service PMIs
  • Thursday 6th October - Initial Jobless Claims
  • Friday 7th October - Unemployment Rate | Labor Force Participation Rate

EUR

The Euro is still falling this morning, despite the mixed market sentiment, after closing 0.13% lower on Friday. Early today, the S&P Global Eurozone Manufacturing PMI was revised lower to 48.4 in September 2022 from a preliminary of 48.5 and below 49.6 in August earlier today, indicating the largest loss in manufacturing activity since June 2020. On the price front, inflationary pressures accelerated due to rising energy costs, albeit pressures from material shortages appeared to have faded significantly. Meanwhile, business confidence has dropped to its lowest level since May 2020, prompting firms to reduce purchase activities even further in expectation of increasingly difficult conditions.

  • Monday 3rd October - S&P and ISM Manufacturing PMI | Eurogroup Meeting
  • Tuesday 4th October - Ecofin Meeting
  • Wednesday 5th October - S&P Global Service and Composite PMIs
  • Thursday 6th October - Retail Sales
  • Friday 7th October - EU leaders Summit

GBP

On the first trading day of Q4, the British Pound surged to return to levels not seen in nearly two weeks after finance minister Kwarteng indicated the government would not implement the top 45% income tax rate for the highest earners, contradicting an earlier promise. Also, the latest data releases show that the S&P Global/CIPS UK Manufacturing PMI was revised marginally lower to 48.4 in September 2022 from an earlier estimate of 48.5, indicating a second consecutive month of worsening in the sector's business conditions. Meanwhile, employment increased as businesses reported success in filling current vacancies, while outstanding business declined for the seventh month in a row. In terms of pricing, both input prices and output charges increased at a quicker rate, remaining elevated and well over their respective survey averages.

  • Monday 3rd October - S&P Global CIPs UK Manufacturing PMI
  • Wednesday 5th October - Official reserves changes | S&P Global UK Composite PMI Services PMI | Construction PMI
  • Friday 7th October - Output per hour YoY

JPY

Despite Japanese government efforts to arrest its drop, the Japanese Yen depreciated past the important level against the dollar once more, creeping closer to a 24-year low set on September 22nd. Finance Minister Shunichi Suzuki has warned that the government is prepared to take "decisive" action to fight significant currency falls. The Finance Ministry confirmed last week that it spent 2.844 trillion Yen in September in its first currency market intervention since 1998, while private analysts assessed the amount to be 3.6 trillion. Japan's Yen has progressively declined this year as policy divergence with the U.S. has grown.

  • Monday 3rd October - Tankan Large Index and Outlook | Tankan Small Index and Outlook | Jibun Bank Japan PMI 
  • Tuesday 4th October - Tokyo CPI | Monetary Base
  • Wednesday 5th October - Jibun Bank Japan PMI
  • Thursday 6th October - Foreign and Local Bonds | Foreign and Local Stocks
  • Friday 7th October - Household Spending | Labor Cash Earning | Leading Index | Coincident Index

CAD

The Canadian dollar is rebounding ground after falling to a 28-month low on Friday when it lost more than 1%. The Canadian dollar is being strengthened this morning by higher crude oil prices. WTI (West Texas Intermediate) crude futures rose more than 4% to more than $83 a barrel on Monday, amid growing speculation that OPEC+ may cut output by up to 1 million barrels per day at a meeting later this week to support prices. Meanwhile, investors anticipate that Canada's central bank will delay its rate hike pace, increasing the yield differential between Canadian and U.S. treasuries and depreciating the Loonie. Last week, the inflation rate fell to 7.0% from the 7.3% expected, adding to the dovish narrative. Moving ahead, investors will get S&P Manufacturing PMI statistics later in the day, which are predicted to rise to 50.6 for September from 48.7 before.

  • Monday 3rd October - Bloomberg Nanos Confidence | S&P Global Canada Manufacturing PMI 
  • Wednesday 5th October - Building permits | International Merchandise Trade
  • Thursday 6th October - Ivey Purchasing Managers Index
  • Friday 7th October - Unemployment Rate | Net Change in employment | Participation Rate

MXN

The Mexican Peso is higher on Monday morning, extending its gains from Friday (closed 0.14% higher). Despite a considerably stronger U.S. dollar, the currency has outperformed the vast majority of EM counterparts monthly and quarterly, ending in September. Following Banxico's 75bps rate hike last week and interest rates reaching 21-year highs, investors are relying on an increasingly inverted yield curve. Banxico also stated that inflationary risks remain strongly on the upside, bolstering analysts' predictions for more hikes this year. Furthermore, in an interview with Imagen Radio last week, Governor Victoria Rodriguez stated that Banxico would continue to raise its key rate in their upcoming sessions. Investors are looking forward to the release of consumer confidence statistics midweek.

  • Monday 3rd October - S&P global Mexico Manufacturing PMI 
  • Tuesday 4th October - International Reserves Weekly
  • Wednesday 5th October - Consumer Confidence | Banamex Survey of Economists
  • Thursday 6th October - Gross Fixed Investments | Vehicle Trade Balance
  • Friday 7th October - CPI reports MoM YoY Bi-Weekly

CNY

The Yuan gained 0.12% against the U.S. dollar on Friday. Markets in both mainland China and South Korea are closed for the holidays. In the most recent development, Chinese officials have increased their rhetorical interventions to support the Yuan and have implemented many steps to deter currency speculation. Nonetheless, the Yuan fell 3% in September as China's monetary policy diverged from that of the U.S. and a bleak domestic economic outlook weighed on the mood. Official data released last week showed that industrial activity in China unexpectedly increased in September, yet slowing services sector growth and a gloomy private manufacturing survey highlighted the country's weak economic recovery.

  • Friday 7th October - Foreign Reserves

BRL

The Brazilian Real declined 0.29% against the greenback on Friday. On the domestic front, Brazil's far-right president, Jair Bolsonaro, will face former leftwing leader Luiz Inácio Lula da Silva in a polarizing run-off vote after performing better than predicted in elections that highlighted the country's conservative movement's power. According to official figures, Lula received 48.4% of valid ballots, falling short of the 50% required for victory in the first round of Sunday's elections. Bolsonaro received 43.2% of the vote, defying pollsters who predicted he would receive support in the upper thirties. On October 30, there will be a second vote. Later today, traders will be looking at trade balance figures and S&P PMI data to provide new impetus.

  • Monday 3rd October - Central Bank Weekly Economist ¦ Trade Balance Monthly ¦ S&P Global Brazil Manufacturing PMI 
  • Tuesday 4th October - Vehicle Sales  
  • Wednesday 5th October - Industrial Production YoY | S&P Global Brazil Composite PMIs ¦ S&P Global Brazil Services PMI
  • Thursday 6th October - FGV Inflation IGP - DI YoY
  • Friday 7th October - Retail Sales MoM
 

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