Daily Market Pulse

Final U.S Presidential Debate


Despite little progress in the stimulus talks, House Speaker Pelosi maintained an upbeat tone regarding getting a deal agreed upon before the election, stemming the tide of USD previous gains. The FX market understood it as a positive advance for risk-on sentiment, which encourages investors to switch to more risky assets. The USD edged down 0.37% against a broad basket of major currencies on Wednesday. On the economic data front, the US Initial Jobless Claims for the week ended on October 16 will be published today, which is expected to come at 860K versus 898K previously. However, today’s main event is the second and final presidential debate between President Donald Trump and Democrat nominee Joe Biden. This will be the President’s last chance to change the direction of the race, where Biden continues to lead by around 10 pts in nationwide polls.


Similar to its major currency peers, the EUR also took advantage of the dollar’s decline. The EUR jumped as much as 0.34% to a fourth straight gain, and five-week highs on Wednesday. The EUR also found support from a renewed hope of a potential soft Brexit, after both countries agreed to try to reach an agreement by the middle of November. On the economic front, the Consumer confidence index in Germany further worsened in November, GfK said in its report published earlier this morning. The index moved downward from -1.6 points to -3.1 points on fears of a second Covid-19-related lockdown. Also, Spain is the first western European country to pass 1 million Covid-19 cases. The unwelcome landmark comes as the Spanish government ponders a curfew and political bickering threatens to endanger the country’s efforts to tame the second wave of the virus.


Other than the fears of Covid-19 and geopolitical tensions, hopes of a soft Brexit are also getting reappraised amid the huge difference between the UK and the European Union’s demands on the knotty issues. Against this backdrop, the GBP rose 1.55% against the USD on Wednesday. Today, the U.K. and the European Union will resume talks over a post-Brexit trade deal, just five days after Prime Minister Boris Johnson suspended the discussions. Therefore, any headlines from Brexit developments might be a market mover.


The Japanese yen went up 0.88%, jumping to a one-month high against the USD on Wednesday as stimulus talks continue in the U.S. Furthermore, investors could be also reducing their exposure to riskier assets ahead of the U.S. elections, which could favor the safe-haven JPY. Rising Covid-19 cases in Europe and the United States also hurt market sentiment. Earlier this morning, a Bank of Japan’s survey showed that Japanese households’ confidence in the economy slumped to a decade-low in the three months leading to September, illustrating the Covid-19 pandemic impact on the world’s third-largest economy.


The Loonie fell 0.16% against the greenback, dragged by weaker futures oil prices after a surprise build-up in U.S crude stockpiles fed concerns of a supply surplus and a spike in global Covid-19 cased fueled demand worries. The latest headline inflation figure for Canada also slightly weighted on the CAD, albeit it came in better than expected. Canada's headline inflation measure in September rose to 0.5% (vs. 0.4% forecast) from 0.1% in August, however underneath the headline figure were signs of ongoing weakness in the Canadian economy. For example, the back-to-school shopping season dropped 4.1%; Air transportations prices fell by 3.2%; Gasoline prices were down 10.7%. The soft inflation figures are the backdrop for the stimulus the Bank of Canada has rolled out since the start of the Covid-19 pandemic, cutting its benchmark rate to 0.25%. 


The MXN finished up 0.11% against the USD on Wednesday, as stimulus talks continue in the US and official data showed the country’s unemployment rate slipped to 5.1% in September from 5.2% in August. The unemployment data indicates that Mexico is seeing a slow recovery in employment levels after the gradual reopening of businesses that were closed due to the novel Covid-19 pandemic. Meanwhile, Mexican shares (IPC) rose 1.2%, lifted by a 3% jump in telecommunications giant América Móvil’s shares after publishing a positive report for the third quarter. For today, the market’s attention will be focused on Economic activity and Retail Sales on Friday.


The Chinese yuan advanced 0.38% against the USD for the fourth trading session in a row on Wednesday even after the central bank set its daily reference rate weaker than expected. The CNY reached its highest level in more than two years. The CNY’s leap is due to firmer central bank guidance and recent data showing a sustained recovery in the country. Moreover, the strengthening of the CNY can be attributed to a wide interest-rate premium over the rest of the world, as well as expectations that a Democrat win in November’s U.S election would encourage further strength.


Similar to its Latin American peers, the BRL was also steady (+0.02%) on Wednesday as the USD extended its declines on rising hopes for a U.S Covid-19 stimulus package. The Brazilian real also gained support after FGV’s survey showed that the industrial confidence index climbed to 110.7 seasonally adjusted from 106.7 in September, according to preliminary figures. It is the highest reading since 2011, as the sector continues to rebound strongly from the Covid-19 lockdown. Meanwhile, Brazil’s central bank reported the Foreign Exchange Flows for the year up to October 16 was negative at US$ 19.753 billion. In the same period last year, the result was a negative US$ 18.004 billion. The annual data largely reflects the effects of the new Covid-19 pandemic on the flow of foreign currency, especially in March.


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