Daily Market Pulse

Daily Market Pulse

Subscribe

Dollar retraces amid restoring risk on mood in global market

USD

The U.S. dollar index, a coefficient used to benchmark the greenback against a basket of six major currencies, extended losses (-0.41%) after Jerome Powell refrained from signaling immediate tapering during his speech on Friday and highlighted that a decision to raise interest rates is separate from tapering the 120 billion bond purchase program. The greenback sustained pressure in response to Powell’s highly anticipated Jackson Hole Speech, which came following a long list of his colleagues supporting an immediate tapering announcement. Moreover, Personal Consumption Expenditures, the Fed’s preferred gauge for inflation exceeded expectations, releasing 4.2% vs 3.5% previously anticipated, providing more supporting arguments for the tapering decision. However, as Powell remains as one of the few doves in the committee, it will be unlikely for any tapering announcement releases if job reports were to disappoint on the upcoming Friday, where all eyes now rest on as the main event of the week. Ahead of that, we expect Consumer Confidence and economic activity indicators releases on Tuesday and Wednesday, including manufacturing PMIs and ISM manufacturing readings.  

  • On Monday (08/30): Gross Domestic Product (PREL) Q2 | Pending Home Sales
  • On Tuesday (08/31): Housing Price Index | Chicago Purchasing Managers’  | Consumer Confidence
  • On Wednesday (09/01): OPEC Meeting | ADP Employment Change | ISM Manufacturing PMI
  • On Thursday (09/02): Good and Services Trade Balance | Nonfarm productivity | Initial Jobless Claims | Factory Orders 
  • On Friday (09/03): Nonfarm Payrolls | Average Hourly Earnings | Labor Force Participation | Unemployment Rate | Markit PMI Composite | ISM Services PMI | Markit Services PMI

EUR

The EUR recorded gains amid a subdued dollar following the Jackson Hole Symposium speech from Jerome Powell. The spokesman said back in July that policymakers believed that it could be appropriate to start tapering this year, noting progress in employment but also adding concerns around the outburst of the Delta variant. However, policymakers will be carefully assessing all incoming data and the evolving risk, refraining from signaling imminent tapering which underpinned stocks and added pressure to the greenback. Although we expect a quiet Monday, European morale indicators are due later today followed by comments from ECB’s Schnabel, and we are looking to close out the month with the release of Consumer Price Index figures expected at 2.8% annualized. Moreover, the week ahead will provide unemployment readings on Wednesday while Producer Price Index will be the main reading on Thursday. Retails Sales and Markit PMI figures are due on Friday alongside the weekly CFTC EUR net positions.  

  • On Monday (08/30): Services Sentiment | Consumer Confidence | Industrial Confidence | Business Climate | Economic Sentiment Indicator
  • On Tuesday (08/31): Consumer Price index | Consumer Price Index Core
  • On Wednesday (09/01): Unemployment Rate | Markit Manufacturing PMI 
  • On Thursday (09/02): Producer Price Index
  • On Friday (09/03): Retail Sales | Markit PMI Composite | Markit Services PMI

GBP

The British Pound sustains momentum against the dollar despite the summer Bank Holiday in the U.K., capitalizing 0.28% during the course of the early trading session amid a broader weakness of the greenback following Powell’s speech at the Jackson Hole Symposium last Friday. The Dovish remarks from Jerome Powell failed to hint at imminent tapering which triggered a broader selloff of the dollar as U.S. treasuries yields edged lower, especially after the Chairman said the interest rate hikes are to be treated separately from tapering the bond purchase program. Despite the cheerful mood, Brexit jitters still dampen the waters as Britain's government has rejected a call from UK Trade body Logistics to temporarily ease post-Brexit immigration rules, which has been contributing to the shortage of truck drivers and acute supply chain disruption that are threatening the festive season in the United Kingdom. As this will be a short business week, we don't expect any major announcements or data releases as per the economic calendar, with the biggest highlight to be Markit Manufacturing PMIs to be released on Wednesday.  

  • On Wednesday (09/01): Markit Manufacturing PMI | Nationwide Housing Prices
  • On Friday (09/03): Markit Services PMI 

JPY

The Japanese Yen advanced mildly against the greenback following the dovish remarks from Jerome Powell which pushed U.S. treasury yields lower. However, the pair continues to trade within a tight 2 week-range amid market uncertainty around Japanese Fundamentals. Health Minister Norihisa Tamura said that it is very difficult to end the “state of emergency” covering 21 of Japan’s 47 prefectures as scheduled, noting that the current measures are scheduled to expire on the 12th of September. The remarks from government officials suggest that the government is currently assessing the measures which might be extended, further compromising Japan's fundamentals. However, Retail trade figures posted earlier today released better than expected figures, posting 2.4% annualized vs 2.1% previously anticipated. Moreover, job reports are expected tomorrow alongside industrial production readings which may renew the sentiment gauge in the market.   

  • On Monday (08/30): Jobs / Application Ratio | Unemployment Rate | Retail Trade | Industrial Production | Larger Retail Sales 
  • On Tuesday (08/31): Housing Starts \ Construction Orders | Consumer Confidence Index
  • On Wednesday (09/01): Capital Spending | Jibun Bank Manufacturing PMI
  • On Thursday (09/03): Jibun Bank Services PMI  

CAD

The Loonie remained on the front foot amid broader dollar weakness and momentum being built around a storm hitting U.S. oil and gas output. The dollar’s softer tone comes off the back of Jerome Powell's speech at the Jackson Hole Symposium, where he agreed to start tapering before the end of the year, but refrained from providing timelines for market participants to build expectations. Moreover, the West Texas Intermediate (WTI) remains shaky, following news from Louisiana and hurricane Ida which knocked down gas and oil output. Despite the WTI recording losses today, the price edged to 3-week highs, above USD 69 per barrel and correcting amid the uncertainty. The week ahead will bring along Gross Domestic Product figures, expected at 6.7% Q2 on Tuesday, followed by Markit Manufacturing PMI on Wednesday and International merchandise Trade reports on Thursday.  

  • On Monday (08/30): Current Account 
  • On Tuesday (08/31): Raw Material Price Index | Gross Domestic Product Annualized | Industrial Product Price
  • On Wednesday (09/01); Markit Manufacturing PMI
  • On Thursday (09/02): Imports | International Merchandise Trade | Exports  Building Permits 
  • On Friday (09/03): Labor Productivity

MXN

The Mexican Peso opened the week on a volatile tone, advancing close over 1% during the early trading session and sharply erasing gains as it currently loses 0.5% losses as of writing. Mexican authorities released their latest national employment survey showing a reduction of over 1% in unemployment during the last year, releasing 4.4% in July vs 5.4% from July 2020. Meanwhile, the underemployment rate fell to 13.2% in July, from 18.3% in the same month last year. Moreover, Olga Sanchez Cordero announced that she will be stepping down from Mexico’s Interior Ministry in order to return to her seat on the Federal Senate.   

  • On Monday (08/30): Budget Balance 
  • On Tuesday (08/31): Net Outstanding Loans | International Reserves | Central Bank Inflation Report
  • On Thursday (09/02): Consumer Confidence  

CNY

The Chinese Yuan advanced 0.23% against the dollar during Friday’s session amid dovish comments from Jerome Powell refraining from hinting at any timing of tapering. Following the lack of a rush to taper the U.S. stimulus, the Peoples Bank of China did not feel rushed to lower Reserve Requirement Ratios (RRR) either, although we expect another cut before the end of the year, which might be timed alongside tapering from the Fed. As fundamentals show signs of recovery, the Chinese economy is still licking its wounds from the flooding in Henan province and the outbreak of the Delta variant which had a direct impact on consumption and industrial production. The week ahead will provide a good flow of data, starting on Tuesday with Non-manufacturing PMIs and NBS Manufacturing PMIs, followed by Caixin Manufacturing PMI on Wednesday and Caixin Services PMIs on Friday. 

  • On Tuesday (08/31): Non-Manufacturing PMI | NBS Manufacturing PMI
  • On Wednesday (09/01): Caixin Manufacturing PMI
  • On Friday (09/03): Caixin Services PMI

BRL

The Brazilian Real advanced 0.8% during Friday’s trading session amid Powell’s comments in the Jackson Hole Symposium which triggered a broader dollar sell-off. Moreover, President Bolsonaro provided some remarks, highlighting that he has never considered a “democratic rupture”, but he insisted that the public demands free and fair elections, rejecting the “dictatorship” from “one or two” magistrates. Additionally, the President signed a decree establishing a new system to facilitate the access of small and micro businesses to credit by broadening the range of organizations that can act as a guarantor for loans. 

  • On Monday (08/30): FGV Inflation IGPM
  • On Tuesday (08/31): National Unemployment Rate | Primary budget Balance ¦ Nominal Balance Rate ¦ Net Debt % GDP
  • On Wednesday (09/01): Gross Domestic Product | HSBC PMI Manufacturing | Trade Balance 
  • On Thursday (09/02): Fipe’s IPC Inflation | Industrial Output

Quick Insights

USD: Dollar remains subdued following dovish comments from Jackson Hole

USD: Dollar remains subdued following dovish comments from Jackson Hole

EUR: EUR on the front foot ahead of morale indicators

EUR: EUR on the front foot ahead of morale indicators

GBP: Sterling advances amid summer bank holiday and dollar weakness

GBP: Sterling advances amid summer bank holiday and dollar weakness

JPY: Japan considering ending state of emergency by 12 September

JPY: Japan considering ending state of emergency by 12 September

CAD: Loonie advances amid dollar weakness and shaky commodities

CAD: Loonie advances amid dollar weakness and shaky commodities

MXN: High volatility amid strong data and political swings

MXN: High volatility amid strong data and political swings

CNY: PBoC in no rush for cutting on RRR, following Powell’s remarks

CNY: PBoC in no rush for cutting on RRR, following Powell’s remarks

BRL: Bolsonaro flags he never considered democratic rupture

BRL: Bolsonaro flags he never considered democratic rupture

Have questions?

Want the Daily Market Pulse delivered straight to your inbox?

Want the Daily Market Pulse delivered straight to your inbox?

Sign up for a free account

Sign up for a free account

Access our convenient and secure online platform to process your international payments. Manage beneficiaries and view payment status and history at the click of a button.

Find out more
FX business solutions

FX business solutions

We provide tailored services to help companies make international payments and manage their foreign exchange risk

Find out more