Daily Market Pulse

Dollar edges up ahead of payroll data

USD

The U.S. dollar index edged up on Friday, following a 0.46% advance the previous day, as traders awaited the March U.S. jobs report for hints on the pace of Federal Reserve policy tightening. Analysts predict 490k, new jobs in March, arguing that a strong employment report might boost the Fed's aggressive tightening plans to control inflation without hurting the economy. Markets are putting in a more than 50% possibility of a half-point rate increase at the next monetary policy meeting in May, following a quarter-point boost in March. Meanwhile, the U.S. dollar gained from safe-haven flows as peace talks between Russia and Ukraine looked to have stopped, but they are scheduled to continue later on Friday. In other news, U.S. market futures drifted higher in Asian trade on Friday after the S&P 500 fell 1.57% and the Nasdaq Composite fell 1.54% on Thursday closing. 

EUR

The Euro closed 0.82% lower on Thursday before consolidating its losses this morning. This comes on the heels of a failed peace talks session between Russian and Ukrainian officials, which fueled market risk aversion. Meanwhile, European Union officials aim to tell President Xi Jinping at a conference that giving Russia an economic or military lifeline will harm China's global standing. In other news, European markets rose modestly as investors assessed the economic outlook in the face of lowering oil prices, tightening Federal Reserve monetary policy, and Russia's war in Ukraine. Moving forward, traders are anticipating Eurozone HICP data, which is a key indicator for measuring changes in purchasing behavior and inflation in the Eurozone and is predicted to increase by 6.6% annually in March. 

GBP

The British pound closed 0.03% higher followed by falling slightly early in the day amid the strong U.S. dollar and the cautious market mood. On the data front,  the S&P Global/CIPS UK Manufacturing PMI was revised marginally lower to 55.2 in March 2022 from a preliminary of 55.5, indicating the slowest rise in manufacturing activity since February 2021. Both output and new orders expanded at slower rates, while new export businesses contracted for the second month in a row. Elsewhere, the FTSE 100 hovered near the flatline on Friday, the first trading session of the second quarter, after closing the first quarter 1.8% higher, outperforming its European peers largely due to its heavier presence of commodity and energy-related stocks, which have benefited from soaring oil and metal global prices amid the Ukraine conflict.

JPY

The Japanese Yen closed 0.11% higher in the previous session against the greenback. The Yen fell against the U.S. dollar on Friday, giving up some of its gains from the previous three sessions, after Japan's finance minister stated that the Bank of Japan aims for steady price inflation rather than foreign exchange rates. Also, former top currency diplomat Mitsuhiro Furusawa agreed that a declining Yen reflects Japan's poor economic fundamentals and trade deficit, but he added that monetary policy is not the appropriate tool for containing Yen losses. In late March, the Japanese Yen fell to 6-year lows as the Bank of Japan's steadfast commitment to maintaining significant stimulus contrasted markedly with other major central banks that began normalizing monetary policy. In other news, the Nikkei 225 Index slid 0.6% on Friday, while the wider Topix Index fell 0.1%, halting a two-week rise, as Japanese stocks matched a disappointing overnight finish on Wall Street.

CAD

The Loonie closed 0.19% lower in the previous session before losing its momentum on Friday morning.  The Loonie fell after oil prices fell following Joe Biden's directive to release 1 million barrels of oil per day from reserves for six months to combat growing expenses. On the statistical front, the Canadian economy grew 0.2% month over month in January 2022, marking the eighth consecutive month of expansion, compared to an upwardly revised 0.1% increase in December and in line with market forecasts. Furthermore, the general business health index remained favorable, with 34% of business owners reporting good business health, while price or salary hikes have witnessed minor rises. In other news, the S&P/TSX Composite index closed at 0.84%, extending the previous session's small decline and matching the drop in global markets facing twin concerns of hawkish central banks set on containing growing inflation and the war in Ukraine.

MXN

The Mexican Peso closed 0.03% higher yesterday against the greenback before losing its momentum this morning. The Mexican Peso plummeted as the U.S. dollar strengthened ahead of the payroll report. On the domestic front, Mexico will refine less oil this year in order to capitalize on an international price increase, putting the nationalist president's objective of producing all of its own fuel on hold. President AMLO stated that the country's oil processing capacity will be reduced from one million barrels per day to 850,000 barrels per day. According to Pemex figures, the country processed 846,329 barrels of crude per day in February, up from 711,612 barrels per day the previous year.

CNY

The Chinese Yuan closed marginally lower in the previous session against the greenback. The Yuan fell against the U.S. dollar on Friday, breaking a three-day winning streak, after data showed China's manufacturing activity fell to a two-year low, heightening expectations of further policy easing. The Caixin China General Manufacturing PMI dipped to 48.1 in March, down from 50.4 the previous month, as the country confronts its most severe Covid-19 outbreak since the pandemic began. The weakening of China's economy strengthens the case for additional policy easing, with many predicting a reduction in the reserve requirement ratio in the second quarter. In other news, the Shanghai Composite surged 0.94%, while the Shenzhen Component rose 0.91% on Friday, reversing losses from the previous day, in anticipation of further economic stimulus following data showing China's manufacturing activity dropped to a two-year low.

BRL

The Real advanced 0.85%, this Thursday and closed the month and the quarter with strong appreciation against the U.S. currency. Market operators attribute the positive movement to monthly Ptax training. Meanwhile,  One of the pillars is weakening which is the flow of foreign capital that has been operating as one of the currency's support pillars continues to decelerate. The purchase of foreign exchange of Brazilian equities declined once again last week as the Ibovespa rose and the Real strengthening. The 5-day moving average of entries net exports fell to USD 251.8 million, below the average of 20 days of USD 270.9 million, according to B3 SA data compiled by Bloomberg. Elsewhere, Industrial production is projected to rise 0.5% in February on a monthly basis, according to the median estimate from a Bloomberg survey, after falling 2.4% in the previous month.

 

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