Daily Market Pulse

U.S Q3 GDP increased at an annual rate of +33.1%


The USD was bullish against all of its major pairs on Thursday. The dollar index climbed 0.50% amid current concerns about the outlook for technology giants, which suffered another sharp fall.  Initial Jobless Claims fell to 751,000 for the week ending October 24th (vs. 770K expected). Continuing Claims declined to 7,756,000 for the week ending October 17th (vs. 7,775,000 expected), from a revised 8,465,000 in the prior week. GDP increased at an annual rate of +33.1% in Q3, according to the "advance" estimate released by the Bureau of Economic Analysis. In Q2, real GDP decreased by -31.4%. Finally, Pending Home Sales slipped 2.2% MoM in September (+2.9% expected), compared to +8.8% in August. This is a second weak housing report in a row signaling that the rebound of this key economic segment is slowing down. For today, uncertainty surrounding Tuesday’s U.S. presidential election and Covid-19 fears continue to loom over the market.


The euro tumbled to four-week lows yesterday, after closing 0.60% lower against the USD for the fourth time in a row. The European Central Bank (ECB) kept its main benchmark rate unchanged at -0.50%. ECB said that "the Governing Council will recalibrate in December its instruments, as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favorable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path". However, the EUR is reflecting the market’s sentiment, which sees that the economy in the eurozone is deteriorating at a faster pace than expected, and (maybe) that monetary easing will not be enough to lift the eurozone. Today, data due include the euro zone’s Q3 GDP and October inflation.


Similar to the EUR, the Pound also fell against the greenback on Thursday. The Sterling edged down 0.42%, undermined by a lack of Brexit-related headlines as the U.K. and EU have just two months to reach a post-Brexit trade agreement. After all, the U.K. could be locking down the whole country, as the PM Boris Johnson is facing growing calls to make such a move, as it continues its strategy of placing individual regions under stricter measures. For today, the consumer will be in focus, with personal income, spending, and consumer sentiment data all due this afternoon.


The Japanese yen fell 0.31% against the greenback on Thursday and earlier this morning closed 0.22% higher in Friday’s Asian market. The safe-haven JPY posted a modest gain over this week as mixed earnings, rising Covid-19 cases and uncertainty over the U.S presidential election has hurt sentiment. Although opinion polls show a Biden victory, the growing risk of an inconclusive result to the U.S election led to a sharp decline in U.S stock futures over this week and also prompted investors to reduce long positions in risky assets and switch to safe-havens, such as USD, JPY, and CHF.


The CAD rallied initially during the trading session, but it failed to hold onto its recent gains and edged 0.03% down against the greenback on Thursday, notching four-week lows. Things were once more dramatic in the oil market, as fears of a further decline in demand grew. Having been as much as 5.1% lower on Wednesday, WTI crude oil edged down 3.26% on Thursday, at $36.17bbl, its lowest since 15th June. On the economic data front, Building Permits increased by 17% month-over-month in September compared to analysts’ forecast which called for growth of just 1.1%. This might reflect a demand for bigger residences outside the urban core as households adapt to a work-from-environment stemming from the pandemic.


The MXN fell 0.5% against the USD on Thursday, for the fourth time in a row, with losses limited after analysts say a Biden win would be the most favorable outcome for the Mexican peso. Markets are backing Mexico as the Biden trade: the peso gained as much as 4.0% this month, making it the best performing emerging currency and cutting year-to-date losses to 10%. Today, investors will keep a close eye on the preliminary GDP number in Q3. 


The CNY rose 0.19% against the greenback on Thursday and earlier this morning, closed 0.28% higher in Friday’s Asian session, outperforming all other currencies in Asia this week. The CNY’s leap today was a tightening of liquidity, which pushed the benchmark gauge of interbank borrowing costs to the highest since February. Demand for the yuan typically rises toward month-end, as banks hoard funds for regulatory checks and exporters sell their dollar receipts. Meanwhile, China's official PMIs for October will be released on Saturday (October 31), which are expected to be broadly unchanged at a recent high. Caixin China Manufacturing PMI will be reported next Monday (November 2), which is expected to be down slightly to 52.8.


The BRL is still under pressure due to the widespread movement of global risk aversion, caused by new lockdown measures across the globe, as well as domestic conflicts between political leaders in Brazil and weaker economic data. The Brazilian real fell 0.58% against the USD on Thursday for the fifth trading session in a row. Domestically, friction between the president of the Chamber of Deputies, Rodrigo Maia, and the president of Brazil’s Central Bank (BCB), Roberto Campos Neto, was on investors' radars after Maia accused Neto of leaking confidential conversations between the two to the local press. The URL was also hit on the back of BCB data showing the country ended September with a primary deficit of R$76.155 billion - the worst performance registered for the month since the beginning of the historical series, in 1997. This means that the debt-to-GDP ratio is on track to hit a record of close to 100%.


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