Daily Market Pulse

The greenback rallies ahead of Non-Farm Payrolls and strong ADP survey

5 minute read


The Russian government announced that they will be offloading their USD exposure from their Sovereign Wealth Fund (SWF). The market seems to have received this news with skepticism or indifference as there were some initial sell-off pressures on the USD, these losses were quickly overwritten by strong ADP Employment Change figures beating expectations. The U.S. data sets positive expectations for today's Non-Farm Payrolls (NFP) at +645,00 new jobs created which if better than expected, would improve the chances that the Fed may do more than just “Discuss tapering”, adding to the greenback’s demand. The U.S. Index, which benchmarks the performance of the greenback against a basket of currencies, had a solid performance during yesterday’s session, closing 0.65% higher amid the expectation of positive NFP figures due later today. Additionally, the Fed announced that it will begin unwinding part of its stimulus program. The deployment of these assets will be in a gradual and orderly fashion minimizing the adverse impact on the market.   


The EUR fell 0.67% against the USD after the ADP survey on private jobs creation released better than expected results, fueling the USD demand. Despite the dollar momentum, Markit Services PMIs were published at 55.2 vs 55.1 expected, while the PMI Composite registered 57.1, also ahead of expectations at 56.9. Earlier this week, Initial Jobless claims recorded the strongest levels since the beginning of the pandemic hinting that NFP figures will follow. Furthermore, we also expect European Retail Sales to register 25.5% year over year growth for April. 


Sterling dropped 0.46% against the dollar testing the lower bound of the three-week channel. The U.K. Prime Minister Boris Johnson said yesterday “I can see nothing in the data at the moment that means we can’t go ahead with step four, the opening on 21st June. But we’ve got to be cautious because there is no question the ONS data on the infection rates are showing an increase”. The declaration from the PM suggests that the government is doing everything in its capacity to stick to the original plan of reopening the economy fully on the 21st of June. However, government officials are aware of the risks related to the spread of the new COVID-19 variant in the U.K and how fast it can turn things around. The governor of the Bank of England Andrew Bailey said that the Monetary Policy Committee has recently discussed the economics of climate change underscoring the U.K commitment and testifying that when it comes to climate change, we cannot stand still.  


The Japanese Yen retraced 0.72% against the greenback in a session mainly driven by general JPY weakness and strong ADP employment change figures from the U.S. The move marked a new two-month low for the Japanese currency which has been gradually depreciating since the last week of April due to the recent outbreak of COVID-19. The market is focused on U.S. data and Fed’s next move with limited Japanese data to incentivize any significant moves. 


The Loonie dropped back 0.67% to the lowest bound of the three-week channel sponsored by strong U.S. data. Overall, the big picture remains unchanged, with overweight prospects on CAD but imminent risks that today's U.S. job reports might increase the chances that the Fed may discuss tapering and adjust policy sooner than expected. Current Oil prices continue to provide solid support for the CAD reducing the exposure of the downside.


The Mexican Peso was one of the main losers against the USD during yesterday's session, falling 1.46% breaking the two-week channel and trading close to the monthly highs. Mexico’s state-owned oil company Pemex reported that the blended oil price in Mexican exports reached its highest level since September 2019. President Andres Manual Lopez Obrador announced yesterday that Mexico achieved a significant milestone, deploying over one million doses per day thanks to the government's efforts in expanding the vaccination brigades. The aggregate vaccination rollout program recorded that 32 million doses have been given in Mexico and the target is to have 100% of the adult population with at least one dose by October this year. On another note, President Obrador accused the U.S. government once more of interfering with Mexican politics and financing opposition organizations colluding against him. 


The Renminbi continued to depreciate 0.35% against the dollar following the efforts from the People’s Bank of China to curb the recent CNY appreciation increasing reserve requirements. Market participants believe that the bear move in CNY won’t last long as the U.S. and European retail sellers are looking to replenish their stock which should help sustain Chinese exports and the demand for CNY, which may trigger further actions from the central bank to ease the rally in CNY. 


The Brazilian market remained closed due to the celebration of “Corpus Christi Day”, after a solid gain of 1.6% on Wednesday's session against the dollar. However, the Brazilian economy has shown robust progress reversing the adverse effects caused by the virus, exceeding the pre-pandemic levels. It seems that the polemic COVID-19 policies and lockdown trade-off President Bolsonaro did, of avoiding closing the economy as much as possible, have started to pay off, though the virus is still claiming lives. Quarterly Gross Domestic Product registered at 1.2% vs 1% a year before the outbreak while Foreign Direct Investment increased 4.6% fueling confidence that the economy will close the year on a positive note. 


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