Daily Market Pulse

There is a dull sentiment hovering on the international financial markets


The U.S. dollar index moved 0.14% down against its six major rivals, while the Treasury bonds also saw little movement, with the benchmark 10-year yield remaining around 1.3 basis points higher at 1.57%. In general, even though global share indexes are very close to their historical maximums, including S&P 500, Dow Jones, and Stoxx 600, and the global vaccination prospects are favorable, there is a dull sentiment hovering on the international financial markets. Part of this is because central banks are heading in the direction of reducing monetary stimulus, at the same time that new cases of Covid-19 are still being registered, as well as global economies that still do not yet show a solid recovery. Looking ahead, last week’s initial jobless claims figures are due and may drive attention.


The common currency closed almost flat (+0.01%) against the U.S. dollar amid a quiet trading session dominated by a mixed tone. While European share markets had a positive day climbing 0.65%, recovering from its worst day in a year registered on Tuesday. Looking ahead, European Central Bank (ECB) is set to start its policy meeting later today. Although no changes to interest rates, asset-purchase programs, or bank loans are expected, ECB President Christine Lagarde will be pressured to reveal how much longer the eurozone will need intensified support. It is expected that the EUR rate will be repriced while Lagarde delivers clues to the European economy’s short-term prospects.


The Cable was almost unchanged (-0.02%) on Wednesday. The market sentiment seems to be a great paradox, on the one hand, in the U.K. business is reopening gradually, and vaccination campaigns around the world continue to accelerate. On the other hand, infections across the world, in particular in India and Japan, are rapidly surging. In short, the bad news appears to be overshadowing the good news at the moment. Looking ahead, Industrial Trends Orders and GfK Consumer Confidence surveys, both from April, are widely expected and may have an impact on the GBP. Also, although no changes to interest rates are expected, the European Central Bank meeting today should drive some attention.


The Japanese yen continued to find some demand (+0.02%) just below the 108 resistance level, but further gains were capped as the country saw a resurgence of Covid-19 cases. With just three months until the Tokyo Olympics, the federal government plans to impose a fresh Covid-19 state of emergency in Tokyo as well as Osaka, Kyoto, and Hyogo prefectures on Friday as infections surge. Looking ahead, investors will wait for the Consumer Price Index for March and PMIs surveys later today. Apart from the economic data, the U.S. bond yields will continue to influence the JPY price dynamics.


Yesterday was a thrilling day for Canadian traders, which were anxiously waiting for the outcome from the Bank of Canada monetary policy meeting. In a statement following its policy meeting, the central bank left interest rates unchanged but said it would trim its weekly net bond purchases from C$4 billion ($3.2 billion) to C$3 billion effective April 26. As a result, the Loonie strengthened sharply (+0.87%) against the greenback. Market participants cheered the meeting’s outcome as that is entirely justified by recent data which shows the labor market is recovering with the economy set to grow by upwards of 5% over the year. Looking ahead, the CAD might continue to trade higher on the back of the policy announcement, while the new house price index for March is due.


The Mexican peso jumped as much as 0.59% against the greenback on Wednesday, recovering some ground lost in the day before, as well as recouping all of its losses this year. The stock market also saw solid gains (+0.56%), with the S&P/BMV IPC index reaching its highest level since September 2018. Gains in the materials, manufacturing, and basic consumer goods sectors drove the index to reach new highs. Looking ahead, March’s unemployment rate and inflation figures for the first half of April will be released later today. Mexico has already been contending with the inflationary impact, where consumer prices rose to 4.7% in March – their highest level since December 2018. Nonetheless, it is expected that the recent MXN’s strengthening to offset surging commodities prices, one of the main reasons for pushing prices up.


The Chinese yuan appreciated 0.11% against the dollar, making its eighth consecutive session in positive territory. The ongoing positive CNY’s performance is catalyzed by the sharp pullback in the U.S. Treasury yields, a solid economic recovery that shrugged off economic pressures from the U.S., as well as because Western major countries do not have a coordinated policy response to China. Looking ahead, investors and traders will continue to assess the effect of further CNY’s appreciation, as it could lead the currency to an overvalued level and trigger global inflation. As Chinese exports seem to be everywhere across a range of goods, the strength could translate into quicker inflation globally, adding to investor expectations for tighter central bank policies.


Yesterday, Brazilian financial markets were closed due to a national holiday. In the background, the Covid-19 still claims many lives, with the country recording 79,719 new cases and 3,472 new deaths, on Wednesday. Although Brazil is seeing a drop in new cases, the relaxation of measures by some municipal governments could bring a reversal in that improvement. Looking ahead, President Bolsonaro will take part in President Biden’s Climate summit, which starts today. Mr. Bolsonaro is expected to reinforce his commitment to end illegal deforestation until 2030. According to Global Forest Watch data, in the two years of his government, over 21,000 sq km, an area almost the size of Israel, has been destroyed.


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