Daily Market Pulse

The dollar rises post-holiday celebrations

USD

The U.S. dollar index, which measures the greenback's performance against a basket of six major currencies, closed marginally lower last week before gaining momentum while opening for the first day of the new week. The dollar index ticked higher on Monday but remained slightly low owing to cautious market positioning as the omicron risk persisted. Thousands of flights have been canceled throughout the globe in the last three days due to Covid-related crew shortages. Additionally, new omicron infections in the U.S. surpassed those in the Delta wave. Elsewhere, U.S. market futures gained on Monday after the S&P 500 hit an all-time high last week, as investors kept an eye on mixed developments around the rapidly spreading omicron variant. Dow Jones futures remained unchanged, while S&P 500 and Nasdaq 100 futures rose 0.1% and 0.2%, respectively. The main averages rebounded last week as fears that the omicron variant will hinder economic development eased, with President Biden declaring that the U.S. would not return to lockdown. Moving ahead, traders will use broad market sentiments and the Dallas Fed Manufacturing Business Index, expected 13.2 versus 11.8 prior, to find short-term trading opportunities around the dollar. 

  • Tuesday 12/28/2021 - Durable Goods Orders ¦ Nondefense Capital Good Orders 

EUR

The Euro closed 0.07% lower against the U.S. dollar last week and continued to trade with minor gains/losses during holidays before heading lower on Monday’s European trading session. The Euro was hovering around its 17-month low and on track to close out the year with a 7.5% loss against the greenback, amid monetary policy divergence, surging prices, and new COVID restrictions. However,  fewer hospitalizations due to Omicron and positive developments regarding the cure of the new COVID-19 strain favored the Euro, although a spike in covid infections in France, which reported an all-time high daily infection rate during the weekend and a doubled rate of covid-related hospitalization in the last month, posed a challenge to buyers limiting upside potential for the common currency. Elsewhere, rising geopolitical tensions between Russia and the West, particularly with Europe, are putting a strain on the European gas supply. Looking ahead, French President Emmanuel Macron is due to convene a meeting today to discuss the possible solutions in the face of growing infections in France.

GBP

The Sterling closed 0.16% higher last week and continues to retain its uptrend with tepid losses while opening for Monday. The British pound has been one of the best performers in the last week or two, due to additional favorable news about the coronavirus's Omicron version. According to reports, the new strain may be less severe than the prior Delta version. In addition, UK research found that Omicron infections are less likely to result in hospitalization. This follows the Bank of England's unexpected rate increase, which was considered as a key factor in continuing to offer some support to the pound. However, anticipation that the UK government may choose to apply further limitations in light of the rapid spread of the Omicron variety in the UK  worked as a headwind for the pound. Furthermore, a modest rise in dollar pricing limits further gains. Coming up, traders will see Omicron headlines and broader market movement to provide fresh impetus to Sterling.

JPY

The Japanese Yen closed marginally higher versus the U.S. dollar in Friday’s session, however, it lost its ground while heading into Monday morning. On Monday, the Japanese currency fell against the US dollar, despite the approval of a record $940 billion budget for 2022 geared for economic recovery late last week. The currency's decline also coincided with words by Bank of Japan (BoJ) governor Haruhiko Kuroda, who cautioned that a weak yen may be affecting households more than in the past, noting the country's growing dependence on increasingly costly raw material imports, which raises the cost of living. Elsewhere, Japan Retail Trade increased 1.9% in October against the estimated 1.7% increase for the year. Furthermore, the BoJ summary of views addressed current growing inflationary pressures and their impact on the economy. Looking forward, traders will rely on Industrial production figures annually and U.S. data releases to drive Yen prices.

  • Monday 12/27/2021 - Unemployment rate  (Nov) 

CAD

The Loonie closed 0.04% lower against the greenback in Friday's session and continued to grind lower on Monday morning. This comes in tandem with WTI crude futures, which fell below $73.5 per barrel on Monday, as airlines across the globe halted flights for the third day in a row on Sunday due to rising Covid infections. Investors, on the other hand, are confident that the economic recovery will not be derailed since research suggests that the current strain is less severe than past strains. The October GDP data showed a 0.8% gain, as predicted, accelerating from a 0.2% increase in September and marking the fifth straight month of growth. Meanwhile, early figures indicate that the economy will likely increase for the sixth month in a row in November. Looking forward, traders will see wider market sentiments and Crude oil prices to provide further price movement to the Loonie. 

  • Thursday 12/30/2021 - GDP (Nov) 

MXN

The Mexican peso finished 0.09% higher against the U.S. dollar on Friday before losing its pace and erasing gains as Monday’s trading session began. This comes after the Mexican Economic data was released last week. Mexico's GDP declined 0.7% year on year in October 2021, after a 0.9% growth the previous month. It was the first contraction since February of last year, as the services sector re-entered contractionary territory (-1.2 percent vs. 0.7 percent in September), as the nation continues to recover from the third-quarter pandemic-induced downturn. Elsewhere, production for secondary activities, which includes manufacturing sectors, slowed in October (0.7% versus an estimated 1.5%) owing to global supply chain disruptions and chip shortages affecting the crucial Automobile industry. Traders will now use broader market sentiments and US data releases, which would offer further price impetus to the Peso.

CNY

The Chinese Yuan closed 0.07% higher against the U.S. dollar on Friday followed by slowing its momentum and moving downwards while entering the first day of the new week. In a holiday-thinned trading session on Monday, the offshore yuan fell against the US dollar, as investors adhered to familiar ranges in the last week of 2021. The Chinese Yuan is on track to grow for the second year in a row, rising approximately 2.5% versus the U.S. dollar. Additionally, the People's Bank of China (PBoC) has offered stronger assistance for the economy and said that monetary policy would become more forward-looking and focused. The central bank also pledged to encourage the healthy growth of the country's real estate industry. In other news, the Shanghai Composite Index fell 0.06% on Monday, while the Shenzhen Component Index rose 0.04% as mainland stocks struggled for direction despite China's central bank's pledge of increased economic support while surging local Covid cases weighed on investor sentiment.

  • Friday 12/31/2021 - NBS Manufacturing PMI (Dec) ¦ Non-Manufacturing PMI (Dec) 

BRL

The Brazilian Real closed 0.32% lower on Friday followed by extending its downtrend as Monday's trading session began. This follows the Central Bank's two currency sales interventions. Brazil’s Central Bank (BCB) launched the first dollar cash sale auction last week on Friday in order to offset pressures related to outflows caused by the over hedge adjustment.  Inflation statistics indicated a 0.78% gain, which was less than market projections, with the year finishing 10.42% higher than 2020. Brazilian economists trimmed the CPI forecast to 3.38% in 2023, while estimates for 2022 and 2024 were unchanged. Furthermore, the Brazilian economy added a net 324.1 thousand formal employment in November 2021, following the 415 thousand added in November 2020 and above market expectations of 216 thousand.

  • Tuesday 12/28/2021 - Unemployment Rate (Oct) 
  • Wednesday 12/29/2021 - Inflation Index/IGP-M (Dec)
 

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