Daily Market Pulse

A busy day on the economic data front

5 minute read


The U.S dollar appreciated a bit (+0.11%) on Wednesday after the “Blue Wave” was completed with the Democrats controlling the House, Senate, and Presidency. The electoral outcome paves the way for significant fiscal stimulus and a unified government, which should drive the USD down and push flows into risk assets outside the United States. It is a busy day on the economic data front with investors waiting for the weekly U.S jobless claims report, trade balance, December’s ISM services PMI report, as well as a handful of Fed speakers are due this afternoon.


The EUR/USD pair continued to rise (+0.25%) on Wednesday and managed to renew the highs of December 30, with the EUR reacting to the further incoming stimulus in the U.S after Democrats took control of the Senate. Looking ahead, a rather busy data docket awaits today. The major data to watch will be the preliminary consumer price index from the EU, the minutes by the European Central Bank (ECB), as well as retail sales. At the same time, market players will react to the U.S jobless claims data and the situation in Washington after Trump supporters stormed the US Capitol building yesterday.


The rise in Covid-19 infections and the recently-announced lockdowns in the U.K is still pressuring the Pound, which slid 0.12% against the greenback on Wednesday. A weaker PMI data also kept the GBP under pressure.  The HS Markit/CIPS UK Services PMI index posted 49.4 in December, up from 47.6 in November but still below the 50.0 no-change thresholds (contraction territory). The reading means that U.K service providers recorded a sustained drop in overall activity during December, with the downturn overwhelmingly linked to business disruptions, restrictions on trade, and temporary closures due to the pandemic. Later today, in the absence of significant economic data from the U.K, the GBP will react to the initial jobless claims report from the U.S, as well as digest the outcome of the U.S Senate election.


The Japanese yen was the weakest major currency on Wednesday, closing 0.31% down against the USD as market players did not feel a need for safety, albeit the sentiment turned a bit sour. The JPY also took a hit from a weaker Japan’s consumer confidence number. The index dropped to 31.8 for the first time in four months in December, owing to a rising number of Covid-19 infections nationwide, the government said in a report on Wednesday. Today, investors will wait for Household Spending for November, which is likely to point to further deterioration as Covid-19 infections expanded further during the month, which pushed down spending, especially on services


The CAD was flat against its U.S counterpart on Wednesday after crude oil prices trimmed some of yesterday's rally that came on the news that the Saudi's planned a voluntary output cut. Canadian traders were also assessing the market’s sentiment that appeared to turn sour while some people protesting the U.S President election result invaded the Capitol Building. Today, December’s Ivey PMI which measures the economic activity is expected to draw interest in the day. 


The MXN printed strong gains (+1.22%) against the greenback on Wednesday tracking higher oil prices, as well as reacting to the "Blue Wave" outcome after Democrats gained control of the U.S Senate by winning two run-off elections in Georgia. The new political framework could allow Biden greater scope to implement major pieces of his agenda, which raised the risk-on sentiment, driving down the dollar and pushing flows into risk assets outside America.


The Chinese yuan was almost unchanged (-0.1%) against the USD on Wednesday, steadying after the USD/CNY pair fell to its lowest level since June 2018. Happening in the wake of the People’s Bank of China lifting the midpoint of its trading band by 1%, the biggest one-day lifting since China left the yuan’s peg to the USD in 2005. The latest PMI data indicated that Chinese services activity growth slowed in December, but remained marked overall. The index fell from 57.8 in November to 56.3 in December, signaling a further increase in service sector activity across China.


The Brazilian real edged 0.48% lower against the U.S dollar on Wednesday in a choppy trading session, which led Brazil’s Central Bank to announce U$ 500 million in currency swap contracts in an attempt to smooth market volatility. As expected by the market participants, the positive PMI numbers for the services sector had a muted impact on the BRL. The IHS Markit Brazil Services Business Activity Index rose from 50.9 in November to 51.1 in December, pointing to a slight but quicker rate of expansion in output. Today, investors will keep an eye on the Consumer Price Index release for the city of São Paulo.


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