Daily Market Pulse

Surging infections across the globe continues


The U.S. dollar index, which tracks the greenback against a basket of its peers, was up 0.28% on Wednesday. Traders and investors were pricing increased optimism around the U.S. economy, but also pricing an increasingly grim sentiment about the pandemic, particularly as the narrative of surging infections across the globe continues to gain traction. The greenback also gained on the back of yesterday’s Manufacturing PMI and Services PMI report for March. Manufacturing PMI increased from 58.6 in February to 59 in March. Meanwhile, Services PMI grew from 59.8 to 60. Looking ahead, the weekly jobless claims numbers will be today’s highlight, which is set to show a fall in initial claims to 730,000 last week. The final estimate of fourth-quarter GDP is also due.


The U.S. dollar hit a fresh four-month high over the Euro, with the single currency dropping 0.31% on Wednesday. The Euro’s drop is due to extended lockdowns and worries about the pace of vaccinations across Europe. Even Germany’s reversal of a call for a strict lockdown over the Easter period was not able to help the currency. In contrast, a further solid rebound was seen in the GfK consumer confidence index in Germany, which rose to -6.2 in April, from a revised -12.7 in March, above the consensus, -12.1. Also, yesterday's PMIs indicate that the EZ economy was on the road to a virus-free recovery by the end of Q1. The composite euro area PMI jumped to an eight-month high in March at 52.5, from 48.8 in February. However, although the confidence index and PMI showed upbeat numbers, a reversal looms next month.


The Pound extended losses (-0.47%) for a fifth day reflecting a risk-off sentiment due to an increasing pessimism about the global economic outlook. However, the GBP has still supported thanks to the country’s vaccine campaign, with more than half the adult population having received at least one vaccine jab. On that note, Prime Minister Boris Johnson warned that the U.K. may need tougher border measures “very soon” to prevent the arrival of Covid-19 variants from continental Europe that risk undermining the so-far successful vaccine roll-out. Moreover, Mr. Johnson also suggested people may have to provide proof of vaccination to visit a pub although this was thought to be unworkable. On the economic data front, the inflation reading last month was weaker than the forecast, with the headline year-over-year rate falling to 0.4% from the previous 0.7% rather than rising to the forecast 0.8%. The data suggest the Bank of England will continue to keep U.K. interest rates low for the foreseeable future.


The Japanese yen was almost unchanged against the greenback on Wednesday, after the U.S. yields declined for the third straight day. The JPY also found support from the PMI numbers. Although the flash PMI data pointed to a general sustained deterioration in business activity in March, the survey came in at 52.0 for the manufacturing sector – a rise from 51.4 in February to signal a quicker improvement in operating conditions. While the services sector index rose from 46.3 in February to 46.5 in March, indicating a softer deterioration in the services sector. Looking ahead, the Tokyo Consumer Price Index for March will be published later today.


The Canadian dollar held steady against the U.S. dollar on Wednesday after four straight sessions of losses as oil rallied. U.S. crude prices were up 2.5% to $59.21 a barrel after a ship ran aground in the Suez Canal raising supply concerns. On the economic front, according to flash estimates from Statistics Canada, Canadian manufacturing sales in February likely dropped 1.0% as spending on the transportation equipment industry declined. On that note, Canada’s Central Bank is seeking for clues to assess the economic recovery in order to taper its purchases of assets this year. Looking ahead, Bank of Canada Gov. Macklem is scheduled to give a public speech later today. Mr. Macklen may speak about the status of current purchase programs, government bond yields, and housing markets. 


The Mexican peso inched 0.61% down against the U.S. dollar on Wednesday, after the recovery of the Mexican labor market lost strength in February, while inflation rose. The mid-month Consumer Price index in Mexico rose to 4.1% year-over-year in the first half of March, from 3.7% in February. Inflation has been edging higher on the back of rising commodity prices and despite the worsening of the pandemic and the sluggish recovery of the labor market. Therefore, accelerating inflation pressures is likely to push Mexico’s Central Bank to keep rates on hold or deliver a modest 0.25% rate cut today.


The Chinese yuan extended losses (-0.13%) for a fifth day reflecting the recent tit-for-tat sanctions, as well as the upbeat U.S. economic outlook, which continues to bolster the greenback while chipping away at the relative appeal of the CNY. In addition, higher U.S. yields have been putting investors away from emerging market currencies and bonds that traditionally yield more (i.e Chinese government bonds). Undoubtedly, with the resurgence of Covid-19 cases in parts of Asia, alongside the relatively slower pace of vaccinations in Europe, the path to a fully Chinese economic recovery looks more distant. Today, investors will wait for February’s Industrial Profit.


The Brazilian Real tumbled as much as 1.8% against the greenback after the country registered over 3,000 Covid-19 deaths in a single day, underlining the scale of the pandemic which is out of control. Also, the market priced in a lumpy vaccine rollout and a messy patchwork of public health restrictions. On the political risk front, President Bolsonaro’s approval rating has fallen sharply, but the majority of Brazilians so far are against him being impeached. Relatively solid fiscal support, including emergency aid to households, and populist policies have backed him. Today, market participants will eagerly wait for the mid-month inflation numbers.


Want the Daily Market Pulse delivered straight to your inbox?

Sign up for a free account

Sign up for a free account

Access our convenient and secure online platform to process your international payments. Manage beneficiaries and view payment status and history at the click of a button.

Find out more
FX business solutions

FX business solutions

We provide tailored services to help companies make international payments and manage their foreign exchange risk

Find out more