Daily Market Pulse

It's a busy day with much-awaited economic data

5 minute read


The U.S Dollar Index, which measures the USD against a basket of currencies, enjoyed a two-session win streak, advancing 0.33% on Thursday. Despite the mayhem in D.C, Congress certified the results of the election yesterday morning, confirming that President-elect Joe Biden had won the contest by 306 Electoral College votes to Trump’s 232. Biden will now be inaugurated on 20th January. Also supporting the USD, initial jobless claims came in at 787,000 in the week ending January 2, slightly lower than the previous week’s reading of 790,000. The Institute for Supply Management (ISM) published its non-manufacturing figures for December, reporting growth in business activity, new orders, and prices as the PMI index jumped to 60.7. Today, the December U.S labor market is due.


The EUR slipped 0.45% against the greenback on Thursday, mainly hurt by disappointing eurozone November retail sales.  Retail sales across the bloc plunged by 6.1% in November, the worst reading since April when the first wave of lockdowns was fully underway. It's a busy day with much-awaited economic data, showing the impact of the second Covid-19 wave on developed economies. November industrial production is due for several European countries and is expected to show France's first monthly decline since April and a slowdown in Germany. 


The pound tumbled 0.32% against the USD on Thursday for the second consecutive day. Fundamentals suggest the rapid spread of Covid-19 and measures to combat it continue to weigh on the Cable, even as the USD trims the latest gains. Starting next week, passengers arriving in the U.K. will be required to prove they do not have the coronavirus, by presenting a negative test result. Overnight, the media reported that Pfizer and BioNTech's vaccine seems to work against the mutations. In the day ahead, investors will keep a close eye on the Halifax House Price Index for December and Labor Productivity in the third quarter of 2020 releases.


The USD/JPY pair was up nearly 0.75% on Thursday for the second trading session in a row after a one-month state of emergency for the Tokyo area was approved by the government. The lockdown is likely to hurt the recovery in domestic demand, with some analysts expecting the economy to fall into contraction in the first quarter of this year. Since the USD/JPY pair tends to be closely correlated to U.S yields, it has been trading in line with rising nominal yields. The U.S bond market was mostly up yesterday, with the benchmark 10-year Treasury picking up 0.036% to 1.078% while the 30-year bond jumped 0.037% to 1.858%. 


The Loonie dipped 0.1% against its U.S counterpart on Thursday as Ivey PMI slowed to 46.7 in December, down sharply from 52.7. This reading put Ivey PMI in contraction territory for the first time since May. Oil prices were steady after hitting fresh 11-month highs on a fall in U.S. stockpiles and in the wake of a pledge by Saudi Arabia to cut output by more than expected. Today, both Canada and the US release key employment data, so investors should be prepared for some volatility during the trading session.


Seen as a technical correction, Mexico's peso dipped 1.86% from a 10-month peak against the greenback on Thursday. Mexico's inflation rate picked up moderately in 2020. The consumer price index rose 0.38% in December from the previous month, leaving the annual inflation rate at 3.15%. Thus, with inflation in 2020 practically in line with the central bank's 3% target, analysts forecast an interest rate cut next month. The bank's next monetary policy meeting is scheduled for Feb. 11.


The Chinese yuan retreated 0.2% against the U.S dollar on Thursday. Despite the slight drop, the CNY has been moving to its strongest value against the US dollar in more than two years, as global investors continued to have faith in the nation's strong economic recovery. The strong CNY gains ratify that global investors are bullish on China's economic growth and will prompt companies to increase imports due to the higher capital inflows while promoting trade financing.


The government's reform agenda, as well as the rise in Covid-19 infections, remain major sources of overwhelming stress in the price action for the currency. This background led the BRL to depreciate strongly 1.81% against the U.S dollar on Thursday. The Consumer Price Index (CPI-Fipe), which measures inflation in the city of São Paulo, decelerated from 1.03% in November to 0.79% in December, according to data published this Thursday by the Instituto Instituto de Pesquisa Economicas (Fipe). As a result, the indicator closed in 2020 with an accumulated increase of 5.62% between January and December. Economists view the FIPE index as a leading indicator of Brazil’s benchmark IPCA inflation index, which the central bank looks at when setting interest rates.


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