Daily Market Pulse

Dollar surges as risk appetite reduce

USD

The U.S. dollar index, which measures the greenback's performance against a basket of six major currencies, closed 0.14% lower on Friday and continued to edge higher on Monday morning. This builds on the previous week's gains as inflationary and geopolitical risks fuelled demand for the currency as a safe haven. Over the weekend, U.S. National Security Adviser Jake Sullivan warned that a Russian invasion of Ukraine "may begin at any time" and warned of civilian casualties, causing the U.S. to threaten Moscow with "rapid and harsh penalties." Meanwhile, U.S. market futures edged up on Monday as investors assessed the escalating tensions between Ukraine and Russia, as well as the outlook for monetary policy. Futures on the Dow and S&P 500 increased approximately 0.2%, while Nasdaq 100 futures jumped 0.1%. The developments followed a volatile week for markets, which were weighed down by a hot inflation report and worries of a Russian invasion of Ukraine. Moving forward, in absence of major events/data releases today, traders will see wider market sentiments and geopolitical headlines to provide fresh impetus to the dollar index. 

  • Tuesday 02/15/2022 - Producer Price Index ex Food & Energy (YoY)(Jan) 
  • Wednesday 02/16/2022 - Retail Sales (MoM)(Jan) ¦ FOMC Minutes
  • Thursday 02/17/2022 - Building Permits (MoM)(Jan) ¦ Housing Starts (MoM)(Jan) ¦Philadelphia Fed Manufacturing Survey(Feb) 

EUR

The Euro closed 0.68% lower in the last session followed by falling down further this morning. This comes as the U.S. dollar has recovered since last Friday as a result of geopolitical worries, causing capital outflows from riskier assets. Furthermore, higher-than-expected inflation in the United States increased the likelihood of a faster Fed tightening, further undermining the Euro. Meanwhile, the recent comments from European Central Bank (ECB) Governing Council Members Olli Rehn and Gabriel Makhlouf pushed back Euro buyers ahead of ECB President Christine Lagarde's address today. Olli Rehn stated that "overreaction to inflation by the central bank could stifle economic development," which in turn dampens rate-hike fears. Looking forward, traders will watch out for speeches from ECB President Christine Lagarde and St. Louis Fed President James Bullard to provide intraday direction. This along with geopolitical events will also be considered by traders to influence Euro prices. 

  • Tuesday 02/15/2022 Gross Domestic Product s.a. (YoY)(Q4) ¦ ZEW Survey – Economic Sentiment(Feb) 
  • Wednesday 02/16/2022 - Industrial Production s.a. (MoM)(Dec) 
  • Thursday 02/17/2022 -Economic Bulletin 
  • Friday 02/18/2022 - Consumer Price Index (MoM)(Jan) ¦ Consumer Confidence(Feb) 

GBP

The Pound Sterling closed 0.05% higher on Friday before losing its momentum on Monday morning amid a strong U.S. dollar. The Sterling's gains last week can be attributed to good GDP figures and a healthy business investment revival. The UK GDP grew by 7.5% in 2021, the highest growth since world war two, after falling by 9.4% in 2020. The GDP is now 0.4% lower than it was before the outbreak. Government spending increased the most followed by household expenditures and gross fixed capital creation. Furthermore, preliminary estimates show that business investment in the UK grew 0.9% quarter on quarter in the last three months of 2021, following a downwardly revised 0.8% drop in the second quarter. In other news, the FTSE 100 was down roughly 2% on Monday, trading at levels not seen in three weeks, reflecting a widespread risk-off mood in Europe and the U.S. amid growing concerns about a Russian invasion of Ukraine. Moving forward, traders will see wider market sentiments today to direct Sterling prices. In addition, market participants will be looking out for labor market statistics tomorrow for further price influence.

  • Wednesday 02/16/2022 - Consumer Price Index (YoY)(Jan) ¦ PPI Core Output (MoM) n.s.a(Jan) ¦Retail Price Index (MoM)(Jan) 
  • Friday 02/18/2022 - GfK Consumer Confidence(Feb) ¦ Retail Sales (MoM)(Jan) ¦Retail Sales ex-Fuel (MoM)(Jan) 

JPY

The Japanese Yen closed 0.51% higher on Friday and continued to edge higher modestly on Monday morning amid reduced risk appetite. This comes as the Japanese currency gained some ground in the previous session as geopolitical uncertainties bolstered demand for the safe-haven currency. Over the weekend, U.S. National Security Adviser Jake Sullivan warned that a Russian invasion of Ukraine "may begin at any time" and warned of civilian casualties, causing the U.S. to threaten Moscow with "rapid and harsh penalties." Meanwhile, Bank of Japan (BoJ) board member Toyoaki Nakamura stated last week that the BOJ will retain its ultra-loose monetary policy in order to help economic recovery and reach the 2% inflation target. His remarks echoed those of other policymakers, emphasizing one of the more dovish attitudes among major central banks. Going forward, traders will see GDP figures for Q4, which is expected at 5.8% annually, to drive Yen prices further. 

  • Monday 02/14/2022 - Gross Domestic Product (QoQ)(Q4) 
  • Tuesday 02/15/2022 - Industrial Production (YoY)(Dec) 
  • Wednesday 02/16/2022 - Exports (YoY)(Jan) Imports (YoY)(Jan) ¦ Merchandise Trade Balance Total(Jan) 
  • Thursday 02/17/2022 - National Consumer Price Index (YoY)(Jan)

CAD

The Loonie closed 0.14% lower on Friday and continued to lose its momentum this morning amid a cautious risk tone in the markets. This comes as the risk of conflict between Russia and the West over Ukraine has intensified, lowering demand for riskier assets. In addition, crude oil prices have fallen from a more than the seven-year peak reached earlier this week. As a result, the commodity-linked Loonie has weakened. Meanwhile, global risk sentiment fell after U.S. National Security Advisor Jake Sullivan cautioned on Sunday that "we are in a window where a Russian invasion of Ukraine may commence at any time and could happen during the Beijing winter Olympics." Moving forward, the market's attention will be drawn to geopolitical developments that will have an impact on oil price dynamics. Aside from that, traders will take cues from the overall risk sentiment in the market. This, combined with rising U.S. bond yields, will push the influence of the Loonie further. 

  • Tuesday 02/15/2022 - Housing Starts s.a (YoY)(Jan) 
  • Wednesday 02/16/2022 - Manufacturing Sales (MoM)(Dec) ¦Wholesale Sales (MoM)(Dec) 
  • Thursday 02/17/2022 - ADP Employment Change(Jan) ¦Canadian Portfolio Investment in Foreign Securities(Dec) ¦ Foreign Portfolio Investment in Canadian Securities(Dec) 
  • Friday 02/18/2022 - New Housing Price Index (YoY)(Jan) ¦Retail Sales (MoM)(Dec) 

MXN

The Mexican Peso closed 0.17% higher on Friday, although it lost its momentum on Monday morning amid general dollar strength. This comes after the Central Bank of Mexico (Banxico) raised borrowing prices by 50 basis points to 6 percent, prompting the Peso to surge to levels not seen since January 18th. The monetary authority stated that inflation risks remain skewed to the upside, with inflation expectations for 2022 and 2023 rising again, while medium-term expectations fell marginally and long-term expectations remained unchanged at levels above the target. Meanwhile, industrial production in Mexico increased by 3.0% year on year in December 2021. This accelerated from a 1.6% increase the previous month but exceeded market expectations of a 2.0% increase and was the tenth month in a row of industrial growth. Moving forward, in absence of any major economic events today and this week, traders will see wider market sentiments and U.S. economic docket releases in the week to drive Peso prices further. 

  • No major events/data releases in the week 

CNY

The Chinese Yuan closed 0.11% higher on Friday against the greenback. On Monday, the Yuan fell against the U.S. dollar, under pressure from widening policy divergence as impending rate hikes in the U.S. contrasted with monetary easing in China. The People's Bank of China has reduced many major short- and medium-term interest rates, with experts anticipating additional easing measures in the coming months, including a 50 basis point reduction in the reserve requirement ratio. Former Chinese currency regulators have also cautioned that policymakers may take additional measures to keep the yuan steady, potentially putting downward pressure on the currency. Meanwhile, geopolitical concerns about Ukraine increased demand for the safe-haven dollar while decreasing interest for riskier currencies.

  • Tuesday 02/15/2022 - House Price Index (Jan) ¦ FDI - Foreign Direct Investment (YTD) (YoY)(Jan) 
  • Thursday 02/17/2022 - Fixed Asset Investment (YTD) (YoY)(Jan) ¦ Industrial Production (YoY)(Jan) ¦ NBS Press Conference Retail Sales (YoY)(Jan) 

BRL

The Brazilian Real closed 0.34% lower in the last session amid high volatility triggered by Russia-Ukraine tensions. Participants continued pricing a real risk of a new armed conflict in Europe. Meanwhile, the latest Commitment of Traders (COT) data, published on Friday by (Commodities Futures Trading Commission) (CFTC), show a view of how funds spec and hedgers positioned themselves in the last week in the futures markets. Speculators have increased their bets on a stronger Real (USD depreciating) for the highest value ever recorded in a week (+33,599 contracts), according to CFTC data since 1995. Also, this is also the first time in 19 weeks that speculators enter the bullish territory for the Real. On the economic front, the Brazilian economy is expected to accelerate at the beginning of the year, after three consecutive quarters of poor performance. Bloomberg's GDP projections suggest an expansion of 0.7% in this first quarter, a more positive view than the 0.4% signaled by the market consensus. However, the publication highlights that the economy continues to be threatened by bottlenecks in the supply chain, high-interest rates, and high inflation. Furthermore, the highlight of the week is President Bolsonaro’s trip to Russia starting Monday and his meeting with Vladimir Putin on Wednesday. on Wednesday. Subsequently, Bolsonaro will also meet the Prime Minister of Hungary, Viktor Orban, in Budapest.

  • Monday 02/14/2022 -  Bulletin Focus
  • Tuesday 02/15/2022 -  IGP-10 - Inflation Index (Feb)
  • Wednesday 02/16/2022 - Foreign Exchange Flow
  • Thursday 02/17/2022 CMN Meeting
 

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