Daily Market Pulse

Dollar under pressure ahead of Wednesday’s Infrastructure bill vote

5 minute read


The USD Index, which benchmarks the performance of the greenback against a basket of six major pairs, fell 0.23% after Friday’s disappointing unemployment figures in the U.S. refreshed the bearish sentiment on the greenback. Overall, yesterday was a quiet session for the USD with 10-year U.S. Treasury yields moving one basis point higher. The market has now turned its attention to the “bazooka” Democrat infrastructure bill, which will begin preparing for a vote on Wednesday this week. President Biden met the republican leaders on Monday to discuss the possibilities of a deal looking to remove the deadlock in the government spending bill.     


The EUR recovered 0.27% against the USD following the disappointing NFP figures on Friday and registering gains for the second day in a row edging closer to the January highs. Yesterday was a quiet session in terms of data. It seems that the market is still digesting the shortage in job creations expecting to postpone the stimulus tapering from policymakers. However, the EUR was supported by Sentix Investor confidence which was released better than expected at 28.1 vs 26. Later today, there will be an interesting flow of data for the Eurozone, starting with the Zew Survey, which we expect to upbeat the market consensus followed by Employment Change and Gross Domestic Product.  


Sterling advanced 0.44% against the greenback driven by a broader USD weakness. However, cable keeps trading close to year highs which have failed to break amid reopening woes keeping pressure on the Sterling. England’s Chief Medical Officer Chris Whitty and Chief Scientific Adviser Sir Patrick Vallance debriefed the minister cabinet, highlighting their concerns over the high transmission and vaccination failure rate to provide 100% protection against the Delta variant. Analysts believe that reopening the economy with the current exposure would have a negative factor and effect on cable.  


The Japanese Yen edged 0.16% higher as the market continued to digest the discouraging U.S. unemployment results from last week. The JPY had an interesting flow of data during the Monday trading session, starting with the preliminary Leading Economic Index release slightly better than expected, followed by Current Account figures missing expectations. Furthermore, Gross Domestic Product showed that the Japanese economy shrank less than previously anticipated in Q1, releasing -3.9% Vs -4.8% yearly change expected. However, despite the data, the economic outlook of Japan will continue to struggle until the vaccination rollout picks up the pace to shift the narrative to a more promising and reopening context.  


The Loonie remained steady (+0.09%) against the USD, trading within the three-week horizontal channel. The market has turned its attention to Wednesday’s Bank of Canada (BoC) interest rate decision, possibly breaking the current channel igniting a new swing in the pair. The Loonie has been the top-performing currency against the USD since the BoC started talking up prospects of a post-pandemic policy in their April meeting, igniting the Sell-off on USDCAD. This week’s meeting will be key for the market to assess whether the BoC will take further steps towards post-pandemic policy or if policymakers will postpone any policy adjustments based on the recent not very impressive Canadian unemployment figures  


The Mexican Peso rallied 0.6% against the greenback following the latest official preliminary results from the Mid-term Mexican election carried out on Sunday. The voting results suggest that the Monera Party will retain a simple majority in the chamber of deputies but cannot reach two-thirds, making things more challenging for President Andres Manual Lopez Obrador to issue new legislation. Additionally, Mexico’s national statistics institute released its latest figures in Car production, showing a pick up of 956% in comparison to May last year. The encouraging increase doesn’t come as a total surprise as car manufacturing plants were closed last year to stop the spread of COVID-19.  


The Chinese Yuan remained virtually unchanged against the dollar as it seems to have lost its strong momentum amid regulatory interventions from policymakers which put a hard stop on the Renminbis appreciation.  Additionally, the macroeconomic scenery appears to have shifted. Commodities have spiked on the back of expectations of a robust global economic pickup led by China, which smashed the Q1 Gross Domestic Product rebound with an 18.3% year-over-year variation. Still, we don’t expect the Asian giant to maintain the pace for Q2 figures slowing down the appreciation of CNY. However, later this week we expect the Consumer Price Index and Producer Price Index, which should provide further color on the Yuan's direction.  


The Brazilian Real remained unchanged against the USD in a tranquil Monday trading session. President Jair Bolsonaro, alongside his Uruguayan counterpart, has been pushing to reduce tariffs for the Southern Common Market trade bloc, Mercosur. Former Presidents of Brazil, Lula da Silva and Fernando Henrique Cardoso issued a joint statement arguing that this is not the momentum for Mercosur to reduce tariffs without any benefits for the bloc exports. Leadership in Argentina has openly opposed Bolsonaro's initiative while Paraguay has remained neutral.


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