Daily Market Pulse

U.S. Durable Good Orders release mixed results


The U.S. dollar index, a common tool used to benchmark the greenback against a basket of six major currencies, remained under pressure during Wednesday’s trading session. This comes amid sustained optimism in global markets, constructive Durable Goods Orders in the U.S., and China gaining back control over the recent outburst of the Delta variant which kept commodities on the front foot. The U.S. Durable Good Orders contracted less than previously anticipated, releasing -0.1% vs -0.3% expected, adding to the risk on the note and pushing U.S. yields higher, boosting the dollar immediately after the release. However, the Durable Good Orders report showed that figures excluding Defense and Transportation underperformed significantly compared to expectations, removing support from the dollar. Additionally, the upbeat mood prevailed over the data, sustaining pressure on the dollar.  On a side note, the Jackson Hole Symposium kicks off today, and it will be held virtually amid rising U.S. Covid cases, signaling that if the Fed can’t carry on their showdown/operations normally, there is no rush to withdraw stimulus. Jerome Powell, Chairman of the Fed, is expected to refrain from tapering during his speech on Friday, amid rising concerns surrounding the impact of the latest outburst of the virus, which keeps the economy in check. Today, the dollar outlook is optimistic ahead of the updated Gross Domestic Product figures for the second quarter, expected to release 6.7% annualized growth, above the preliminary figures posted at 6.5%, while Jobless Claims are forecasted to extend their downtrend.    


The EUR extended gains against a weakened dollar, amid a cheerful market mood and U.S. tapering expectations easing down. The approved Pfizer/BioNTech by the U.S. FDA underpins optimism that the Delta variant won’t derail the global economic recovery, and news from China announcing the easing of Covid measures amid the absence of the virus in the country has only served to contribute to this positive outlook. However, the EUR was weighed down by poor German data, as IFO data showed that there was room for improvement in the business climate and German morale. Moreover, the vice president of the European Central Bank, Luis De Guindos, announced during a speech yesterday that the ECB might revise their economic forecasts for the European economy in September, amid positive economic indicators in the third quarter of the year. Coming up, market participants will stay tuned to GDP and Jobless claims from the U.S. while on the European front the ECB is due to release the minutes of its latest monetary policy meeting. 


The British Pound edged 0.26% higher against the greenback during yesterday’s trading session, snapping three consecutive days of recording gains against the dollar amid a positive mood in global markets which has largely kept the dollar on retreat. However, today the cable remains offered ahead of important growth data and the follow-up of a warning from supermarkets warning of food shortages over Christmas due to Brexit and Covid. High Executives from Co-op supermarkets said that Britain’s post-Brexit supply chain crisis could cancel Christmas and continue to cause food shortages well into 2022. Brexit fears, in combination with peculiar and unprecedented demand from the European Parliament with regards to fishing in UK waters, kept the potential of Sterling capped at this stage. Moreover, the market is cautious ahead of the Jackson Hole Symposium, U.S. Personal Consumption Expenditure, and U.S. GDP readings for Q2, as these will be key drivers in renewing impetus in the market.  


The Japanese Yen was one of the worst-performing currencies against the dollar during Wednesday’s trading session, edging 0.34% lower as U.S. Treasury yields edged higher.  The 10-year treasury yield pumped up to 1.34%, the highest in over two weeks, bolstering demand for dollars, while the safe-haven appeal weighed on the Japanese Yen amid restoring sentiment in global markets and fundamentals lagging behind in the country. Datawise, Japan’s Corporate Service Price index released upbeat data during the early hours of the trading session, posting 1.1% vs 1% previously anticipated, although the impact over the market remained very low and the Yen continued to extend losses. 


The Canadian Dollar remained virtually unchanged during yesterday’s session, as the strong CAD momentum fades amid investor caution ahead of U.S. key data and the Jackson Hole Symposium. The move in the West Texas Intermediate (WTI) followed a similar pattern, with prices per barrel sustaining above the USD 67 mark, following a solid rally of over 9% since the beginning of the week. Overall, the strong risk-on momentum seems to have softened on Wednesday, as investors now eye the Fed’s virtual Fed showdown which is due to finish with Jerome’s Powell speech, where he is expected to refrain from hinting at tapering amid the impact of the Delta variant over the economy.  


The Mexican Peso remained relatively unchanged against the greenback, as the risk on momentum slows down ahead of Jackson Hole Symposium and key U.S. data, which will be vital for a renewed market trend. However, the market still breathes an air of optimism, as vaccine/FDA headlines and China’s control over the virus suggests that the virus won’t retail the economic recovery. Moreover, Mexican Gross Domestic Product released its Q2 figures at 19.6% year over year, slightly below the 19.8% previously anticipated and 19.7% at its previous release. Despite the growth figures, the Current Account showed an improvement in the net flow of current transactions, expanding its surplus. 


The Chinese Yuan had a quiet session, retracing 0.05% on Wednesday, after recording two consecutive days of gains against the greenback as the risk on momentum takes a breather ahead of the Fed’s showdown and Chinese tech crackdown which keeps investors cautious. However, the market mood is supported by Chinese fundamentals, following their announcement on Monday that there are no local Covid-19 cases for the first time since July, easing concerns about a sizable impact on commodity demand. Following the announcement, concerns about demand seem to have lost their fear factor, easing down momentum on the broader rally of the commodities.   


The Brazilian Real extended gains against the dollar, closing 0.94% higher as the strong momentum of Tuesday (+2.15%) lingered until Wednesday’s session. The recent rise in inflation, with mid-month figures, posted 0.89% vs 0.82% expected, exceeded expectations suggesting sustained inflationary pressures.  BCB president Roberto Campos said that the central bank has the means to put 2022 inflation on target and that expectations are contaminated by fiscal noise and the broader political turmoil between the Executive Branch and the Judge Branch.   


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