Daily Market Pulse

Little market movers


U.S markets were closed yesterday for the Thanksgiving holiday. Today it will face early closes in bond and equity markets. The minutes of the November 4/5 Federal Open Market Committee (FOMC) meeting, which were published on Wednesday, unveiled that policymakers debated a range of options to tweak the bond-buying program to support the economic recovery. Also, adding support to the upbeat market mood, optimism over several Covid-19 vaccine developers put the dollar under pressure as investors sought riskier assets. It is expected little market movers and low volume during the trading session today.


The EUR saw little change (-0.2%) against the USD on Thursday, but during the trading session, it touched a two-month high in the wake of the minutes’ that the European Central Bank (ECB) released. The minutes from the ECB’s October meeting further confirmed the expected announcement of stimulus measures when the central bank meets in December. Moreover, the document showed policymakers in agreement that complacency is not an option and they are beginning to prepare for more stimulus measures as Europe continues to struggle through a second wave of Covid-19 cases. However, Poland and Hungary are still blocking the EU’s spending plans, dashing hopes that a compromise would be found over the pair's objection to tying stimulus money to rule-of-law standards.


The pound inched down 0.20% against the greenback on Thursday after touching its near three-month high, with market participants looking towards progress on Brexit talks between the U.K. and the European Union (EU). Later today, Michel Barnier, the EU chief negotiator is reportedly due to speak with some EU fisheries ministers to discuss the current state of the trade discussions as he is set to end his quarantine. London city remains on the radar for traders due to the new tiers for Covid-19-related restrictions that are set to be announced later in the day.


The pair USD/JPY closed down 0.19% on Thursday as it continues to trade with its overall downtrend. Domestically, Prime Minister Yoshihide Suga recently said that the Bank of Japan will extend a subsidy scheme that compensates companies for retaining employees while temporarily closing the business due to the Covid-19 pandemic until February. The stated aid package was previously set to expire in December. Continuing on a positive note, a recent Reuters poll showed that Japan’s factory output probably grew for a fifth straight month in October and retail sales have likely rebounded for the first time in eight months. Official data from the Japanese statistics agency is scheduled for later today.


The CAD slid 0.10% against the USD on Thursday amid the Thanksgiving Day holiday in the U.S., as well as the recent rally in oil losing some momentum. On the economic front, Canadian payroll employment rose by 337,500, or 2.2%, in September, Statistics Canada said. Still, payroll employment has declined by 1.2 million since February due to the Covid-19 crisis. Today, it is expected to be another quiet trading session with few changes.


The Mexican peso fell 0.44% against the USD on Thursday amid a quiet trading session due to a lack of volume, but it was busy from the economic data perspective. Retail sales fell by 7.1% year on year in September, better than market expectations of -8.7%. Retail sales remain below pre-outbreak levels (February), but already printing signs of improvement. The statistics agency (INEGI) also published the Q3 GDP, which showed that Mexico’s economy bounced back in the third quarter, driven by a strong recovery in secondary activities with GDP growing 12.1% between July and September from the previous three-month period. According to INEGI, U.S. demand has helped the country rack up large trade surpluses during the past four months, as exports picked up speed, especially in the manufacturing industry. In stark contrast, domestic demand has lagged, with many businesses still struggling.


The Chinese yuan held steady against the USD on Thursday amid small market moves. The CNY is likely to extend its winning streak to December after the People’s Bank of China (PBoC) signaled that it would adjust its monetary policy directives. PBoC unveiled on Thursday that it would begin to taper its stimulus and relief efforts, according to local state-run media. Due to the economy improving at a faster pace, policymakers do not think it is necessary to continue with an aggressive monetary campaign, yet it is unlikely that the central bank would raise interest rates. Adding support for PBoC’s narrative, profits at China’s industrial firms grew 28.2% year on year in October for a sixth consecutive month and at their quickest pace since early 2017, pointing to a steady recovery in the manufacturing sector after it was hard hit by the Covid-19 pandemic.


In a day of reduced liquidity in the international market owing to the U.S Thanksgiving holiday, market participants were attentive to political noise in Brasília. The BRL fell 0.24% against the USD on Thursday after Economy Minister Paulo Guedes responded to the criticisms he has received about the performance of the economic team concerning fiscal, administrative, and tax reforms. The Minister's harsh comments were directed to central bank president Roberto Campos Neto, putting in doubt the stability of the relationship between the two largest economic representatives in the country. A red flag for inflation from the perspective of producers. The Producer Price Index (IPP), which measures inflation in the extractive and manufacturing industries, increased 3.4% in October against 2.34% in September, the Brazilian Institute of Geography and Statistics (IBGE) showed on Thursday. This reading was the highest since 2014 when the IPP began to be tracked.


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