Daily Market Pulse

Weekly unemployment claims increased by 53,000


The USD outperformed its main peers on Thursday, favoring its safe-haven status amid a risk-averse sentiment. The dollar index traded 0.45% higher owing to a confluence of factors from Treasury Secretary Mnuchin’s statement about the U.S stimulus to Brexit headlines, which further fueled the risk tone seen across the markets. On the macroeconomic data front, weekly unemployment claims increased by 53,000 to 898,000 last week, surpassing expectations of 825,000 claims and showing that the labor market recovery is losing momentum. Today, investors will keep an eye on Retail sales and Industrial output reports, which will provide an insight into U.S consumers spending in September and offer more evidence that the economic recovery from the Covid-19 recession is faltering.


Similar to its currency peers, the EUR also saw its value weakening on Thursday, by 0.34% against the USD. This was amid an increasing global inclination towards risk aversion, catalyzed mainly by further severe restrictions to combat Covid-19 across the European Union, lack of progress in the Brexit negotiations on the first day of the EU Summit, as well as recent U.S-EU tension. Yesterday, President Trump said the U.S will “strike much harder” if the EU goes ahead with tariffs on $4bn worth of American products, in clear reference after the EU this month won the World Trade Organization’s permission to hit U.S. goods with tariffs in its ruling over illegal state aid American provided to Boeing Co. Today, investors will remain focused on incoming news flow today – from Brexit to the pandemic. 


The GBP went back and forth initially during the trading session on Thursday waiting for news from the EU Leaders Summit. Unsurprisingly, both sides did not make further progress on the Summit’s first day, which weighed heavily on the GBP, with the GBP/USD pair closing 0.75% down. The Sterling also took a hit due to a severe measure imposed to fight against the spread of Covid-19, where Londoners are banned from mixing with other households indoors from Saturday and Prime Minister Boris Johnson may be pushed toward a national lockdown. Today, it is the second and last day of the EU summit, where PM Johnson is very likely to decide to pursue a no-deal Brexit. Any new rumor about Brexit talks can send the currency racing in one direction or the other.


The JPY lost its previous gains, closing 0.28% down against the greenback on Thursday. The JPY’ dip was due to the broad USD strength amid a global risk-off mood. The risk-averse sentiment was also fueled after the Japanese newspaper Yomiuri Shimbun said that Japan will not participate in the Trump administration's plan to exclude Chinese firms from telecommunications networks. It is a quiet day on the economic front, therefore, market participants will keep assessing the risk-off environment, which continues to be catalyzed by news coming from the U.S, as leaders are unable to agree on a Covid-19 stimulus package and a steep increase in the number of new Covid-19 cases in multiple European countries.


The Canadian dollar recorded strong losses in Thursday’s session. The CAD slipped 0.56% against the USD after the September ADP nonfarm payrolls report showed a dismal employment figure, with a reading of -240,000 Jobs in September 2020. Also, yesterday, Deputy Governor Tim Lane participated via videoconference in a panel discussion at the Central Bank Payments Conference, where he highlighted that the Bank of Canada (BoC) has been exploring and building capacity for products like a central bank digital currency (CBDC) and the BoC need to move faster than previously thought, but muted impact on USD/CAD pair. On the economic data front, market participants will be focused on Manufacturing sales figures which is expected to be released today.


The MXN straightened 0.27% against the USD after central bank deputy governor Jonathan Heath said in a tweet on Thursday that Mexico could potentially see growth above 12% in the Q3, based on economic modeling. However, additional gains were limited with market participants showing concern about the increase in Covid-19 cases in Europe and a possible cooling of the international market. The Mexican peso might keep trading flat or with limited gains as investors move back into the USD as markets turn risk-averse.


The CNY inched down 0.14% against the greenback on Thursday, despite improvements in credit conditions in September. According to the People's Bank of China (PBOC), in September, Chinese banks distributed CNY 1.90 trillion (USD 282 billion) in new yuan loans. The reading came in above the CNY 1.28 trillion recorded in August. Furthermore, total social financing (TSF) - a broader measure of credit and liquidity in the economy that includes loans, bonds, and other non-traditional instruments - was stable at CNY 3.48 trillion in September from CNY 3.58 trillion in August. Both figures illustrate that PBOC’s financial support measures rolled out since early February, including cuts in lending rates and bank’s reserve requirements, as well as targeted loan support for virus-hit-companies, have been helping the Chinese’s economy to grow at a solid pace.


The BRL fell 0.36% against the USD on Thursday, extending its declines to the third straight day, but losses were limited after positive economic activity data had been released. The Brazilian economy grew for the fourth consecutive month in August, according to figures released on Thursday by the Central Bank of Brazil. The Economic Activity Index (IBC-Br), considered a "preview" of the Gross Domestic Product (GDP), showed growth of 1.06% in August. Despite recent data showing that the Brazilian economy is growing, the USD rose on signs the U.S. economy was stalling while fiscal stimulus appeared unlikely before the U.S presidential election and on fears about new lockdowns in major European countries where cases are spiking.


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