Daily Market Pulse

Another busy day of corporate earnings and key economic events


The Dollar softening was noticeable yesterday, as corporate earnings bolstered Wall Street. The U.S. dollar lost -0.24% against a basket of major currencies as risk appetite improved due to positive earnings updates from a slew of companies including General Electric and Johnson & Johnson. Most notably the U.S. Federal Reserve finishes its first meeting of 2021 today, and Chairman Jerome Powell will give comments on future bond-buying, both will be watched closely.  Heading into the key economic data, the release of the US Durable Goods Orders data might influence the USD price dynamics and provide some impetus. In Wall Street, another busy day of corporate earnings lies ahead, highlighted by Apple and Facebook.


The softer greenback allowed the single currency to continue appreciating, which added 0.18% yesterday. Some analysts suggest the market has been overlooking the environment which surrounds the EUR, given the perilous state of affairs with the Covid-19 pandemic across the bloc, and the rather slow pace of vaccination. Meanwhile, Italian political uncertainties have also the potential to shake things up as the resignation of PM Giuseppe Conte, counts much more for himself than to the Italian nation. In the absence of material economic data, investors will watch for the key U.S events.


The GBP/USD pair had a strong day, with the Pound closing 0.44% up on Tuesday. The GBP’s leap was due to the impressive vaccination program, as well as the falling Covid-19 metrics, which are more impressive than those observed across the European bloc and other developed countries. However, further gains were capped after the U.K. unemployment rate hit its highest level in 5 years in November, official figures showed on Tuesday, although the government's wage-subsidy scheme kept joblessness lower than in other countries. Today, the first U.S FOMC decision of the year will drive attention.


The Japanese yen remained solid (+0.11%) against the USD on Tuesday, after the Bank of Japan meeting minutes did not show surprises. Nonetheless, it is worth noting that several members expressed concerns about the exchange rate, ratifying that the depreciation of the USD against the JPY “continued to warrant attention”. Later today, the Japan Leading Economic Index, which is a gauge of the economy a few months ahead and is compiled using data such as job offers and consumer sentiment, will be released and it is expected to draw interest.


The Loonie rose 0.37% against the greenback on Tuesday, as corporate earnings bolstered Wall Street and put the dollar under pressure. Buoyant energy commodity prices, particularly oil prices, also helped to support the CAD outperformance. Meanwhile, Prime Minister Justin Trudeau will seek exemptions to a U.S. effort to ensure federal agencies buy American-produced goods, as Canadian business groups expressed concern about the potential impact of this U.S’s move. Looking ahead, markets await today's FOMC announcement.


The Mexican peso rose 0.4% against the greenback on Tuesday after a three-day losing streak. The Peso was boosted after Mexican retail sales rose by 3.3% in November from October in seasonally-adjusted terms, the biggest monthly increase in four months, data from the national statistics agency (INEGI) showed yesterday. However, the soaring Covid-19 death tolls could lead the country to tighten its measures in order to combat the virus spread, hampering the economic recovery and weighing on the demand for its assets. The country has the fourth-highest death toll from the pandemic in the world.


The Chinese yuan printed gains (+0.22%) against the greenback on Tuesday, underpinned by a strong demand for cash heading into the long Lunar New Year holiday. Also, China’s Central Bank has not been making net liquidity injections into the banking system to meet this bid, which has increased the upward pressure on the yuan. On the economic data front, profits for China's major industrial enterprises reached to the tune of 110 billion U.S dollar in December, skyrocketing 20.1% from a year earlier. The figures also contributed to keeping the CNY firm.


The Brazilian Real rose 2.04% against the USD on Tuesday, with investors and traders assessing Brazil’s Central Bank (BCB) Meeting Minutes released yesterday. BCB does not expect to raise interest rates in the immediate future due to an unusually high degree of economic uncertainty, however, fiscal risks could prompt it to tighten policy faster than its baseline scenario suggests. In addition, the minutes showed that policymakers thought the Covid-19 pandemic and the end of emergency cash transfers could slow or even temporarily reverse an economic recovery. Contributing to triggering the BCB’s attention to inflationary prices, the Mid-Month Consumer Price Index (IPCA-15) came at 0.78% in January, the highest level since 2016.


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