Daily Market Pulse

Dollar hovers near 16 months high

USD

The U.S. dollar index, which measures the greenback's performance against a basket of six major currencies, closed 0.02% higher on Friday, albeit that it lost its momentum and dipped when heading into Monday morning. The U.S. dollar index has fallen from its highest level since July 2020, after reaching an 18-month high in the previous session, as demand for safe-haven currencies has decreased. This upward trend in the previous session was supported by investors who are braced for impending Federal Reserve interest rate hikes. The U.S. Fed suggested last week that it would likely raise interest rates in March and begin shrinking its balance sheet soon after to combat inflation, with markets pricing in five quarter-point rate hikes this year. To support this view, figures released on Thursday indicated that the U.S. economy grew significantly faster than projected in the fourth quarter, expanding by 6.9%. In other news, U.S. Treasury yields maintained the hawkish Fed-led optimistic momentum, with two-year rates rising above 1.20%. Moving on, today will see the release of the Chicago Purchasing Managers' Index, which is projected to be 61.7, which will further drive dollar prices. Furthermore, Manufacturing PMI, Service PMI, PMI Composite, and Labor Market statistics will be issued later this week.

  • Monday 01/31/2022 - Chicago PMI (Jan)
  • Tuesday 02/01/2022 - ISM Manufacturing PMI (Jan) ¦ Markit Manufacturing PMI (Jan) 
  • Wednesday 02/02/2022 - OPEC Meeting ADP ¦ Employment Change (Jan) 
  • Thursday 02/03/2022 - Nonfarm Productivity (Q4) ¦  Markit PMI Composite(Jan) ¦ ISM Services PMI (Jan) 
  • Friday 02/04/2022 - Labor Force Participation Rate (Jan) ¦  Nonfarm Payrolls (Jan) ¦ Unemployment Rate (Jan) 

EUR

The Euro closed 0.04% higher on Friday before extending its gains on Monday morning. The Euro maintains the optimism observed at the close of last week, rising for the second session in a row. In doing so, the Euro has recovered from a 19-month low hit during the previous session, owing to the market's favourable risk sentiment. Furthermore, the increased bullish sentiment in the pair looks to be supported so far by a comeback in German 10-year Bund yields. However, higher U.S. Treasury yields and monetary policy divergence between the Fed and the ECB (European Central Bank) prevent an additional upside. Meanwhile, the Eurozone consumer confidence indicator was confirmed at -8.5 in January 2022, the lowest level since March of last year, suggesting decreased expectations regarding consumers' financial situations as well as the current and future general economic condition. Following that, the focus will move to the Eurozone's Preliminary GDP and Germany's Preliminary CPI statistics, which are set to be featured today. In addition, Inflation data, the ECB's monetary policy decision, and labour market statistics are all set to be released later this week.

  • Monday 01/31/2022 - GDP Q4
  • Tuesday 02/01/2022 - ECB Bank Lending Survey ¦ Unemployment Rate (Dec) 
  • Wednesday 02/02/2022 - Consumer Price Index (Jan)  
  • Thursday 02/03/2022 - Markit PMI Composite (Jan)  ¦ ECB Deposit Rate Decision ¦ ECB Monetary Decision statement ¦ ECB interest Rate Decision 
  • Friday 02/04/2022 - Retail Sales (Dec) 

GBP

The Pound Sterling closed 0.13% higher on Friday and continues to move upwards on Monday morning. The British pound is looking to build on Friday's bounce from the five-week lows recorded last Thursday, as the overall optimistic market environment favors the pound's high-beta currency. Furthermore, the upswing is favored by investors, who are taking profits ahead of the Bank of England (BOE) monetary policy meeting. On Thursday, the BOE is expected to issue a second 25-bps post-pandemic rate hike, putting it slightly ahead of the Fed in the tightening cycle. Aside from the BOE's decision this week, markets are still focused on the passing of the Brexit Freedoms Bill and the UK's political situation. In other news, the UN Security Council will meet today to examine the Ukraine situation, just as the U.S. is about to pass major sanctions against Russia. Moving forward, market participants will be watching for the Markit Manufacturing PMI and the Bank of England's monetary policy decision later this week.

  • Tuesday 02/01/2022 - Markit Manufacturing PMI (Jan) 
  • Thursday 02/03/2022 - Bank of England Minutes ¦ Bank of England Monetary Policy Report ¦ BoE Interest Rate Decision Monetary Policy Summary ¦ BoE's Governor Bailey speech 

JPY

The Japanese Yen closed 0.10% higher on Friday followed by consolidating its gains on Monday morning. In doing so, the Japanese Yen maintained its drop against the U.S. dollar and was set to conclude a volatile month roughly 0.3% lower, as the currency erased its year-to-date gains under the U.S. Federal Reserve's steady hawkish attitude. The safe-haven Japanese Yen has been weakened by a resurgence in global risk sentiment, as seen by a generally upbeat tone in the equity markets. Meanwhile, the rise in the benchmark 10-year JGB (Japanese Government Bonds) to its highest level since January 2016 helped to limit the domestic currency's further losses. Additionally, the Yen fell as other economies showed their willingness to tighten monetary settings, while the Bank of Japan vowed to retain its ultra-easy monetary policy in order to meet the central bank's 2% price stability target. In other news, Japan's consumer confidence index fell to a 5-month low of 36.7 in January 2022, down from 39.1 in December 2021, due to uncertainty generated by increasing cases of the Omicron strain in most parts of the country. Moving on, market investors are now anticipating the U.S. economic calendar, which, together with Treasury yield rates, may affect Yen prices further.

  • Monday 01/31/2022 - Unemployment rate (Dec) 
  • Tuesday 02/01/2022 - Jibun Bank Manufacturing PMI (Jan) ¦ Monetary Base (Jan) 
  • Wednesday 02/02/2022 - Foreign Investment in Japan Stocks (Jan 28) ¦ Foreign Bond Investment (Jan 28) 
  • Thursday 02/03/2022 - Jibun Bank Services PMI (Jan) 

CAD

The Loonie closed 0.22% lower on Friday before regaining its momentum on Monday morning. The Loonie saw modest buying on the first day of a new week, extending Friday's late rebound from three-week lows. Concerns about global supply constraints and geopolitical dangers kept crude oil prices stable near a multi-year high. As a result, the commodity-linked Loonie was supported. Additionally, an optimistic tone in the equity markets triggered some profit-taking in the safe-haven U.S. dollar, assisting the Loonie's upside movement. Meanwhile, markets appear to be convinced that the Fed will begin raising interest rates in March and have priced in five quarter-point rate hikes by the end of 2022. In contrast, the Bank of Canada (BOC) surprised investors who expected the tightening cycle to begin soon. Moving forward, market investors are now anticipating the U.S. economic calendar, particularly the release of the Chicago PMI later in the early North American session. In addition, GDP numbers, the Markit Manufacturing PMI, the BOC Governor's address, and labour market data for Canada will be released later this week.

  • Tuesday 02/01/2022 - Gross Domestic Product (Nov) ¦ Markit Manufacturing PMI (Jan) 
  • Wednesday 02/02/2022 - Building Permits (Dec) ¦ BoC's Gravelle speech 
  • Friday 02/04/2022 - Net Change in Employment (Jan) ¦ Participation Rate (Jan) ¦Unemployment Rate (Jan) ¦Ivey Purchasing Managers Index (Jan)

MXN

The Mexican Peso finished 0.23% lower followed by recovering its momentum on Monday morning. The Mexican peso fell to its lowest level since December 21st, as the dollar strengthened. After stronger-than-expected U.S. Q4 GDP growth supported a more hawkish Federal Reserve stance, the dollar index traded near levels not seen since June 2020. Furthermore, early statistics indicated that the Mexican GDP likely lost 0.2% in December, and the economy faces a probable credit rating drop in the medium term as a result of political developments, including the expected passage of a contentious energy bill. As a result, the Mexican Peso has been weakened. Elsewhere, Mexico's trade surplus decreased to USD 0.59 billion in December 2021, down from USD 6.2 billion in the previous year's corresponding month, falling short of market estimates of a USD 1.1 billion trade surplus. Moving forward, Consumer confidence for January will be featured later in the week. 

  • Thursday 02/03/2022 - Consumer Confidence (Jan) 

CNY

The Chinese Yuan remained unchanged against the greenback on Friday as the markets in China remain closed due to Lunar new year celebrations. The Yuan is expected to close the volatile month approximately 0.2% lower, as the currency erased its year-to-date gains amid the U.S. Federal Reserve's solid hawkish attitude. Additionally, future rate hikes in the United States will be contrasted with monetary easing efforts in China as the country attempts to cushion a faltering economy. Meanwhile, the Caixin China General Manufacturing PMI fell to a 23-month low of 49.1 in January 2022, down from 50.9 in December, and falling short of the market consensus of 50.4. The most recent assessment indicated the second decline in industrial activity in three months, owing to COVID-19 flare-ups and strict control measures under Beijing's zero Covid strategy. Moving forward, the U.S. dollar price dynamics and broader market sentiments will continue to influence the Yuan during the week.

  • “No major events/release for this week”

BRL

The Brazilian Real closed 0.83% higher against the greenback on Friday. This comes on the heels of global market stabilization and Wall Street's resurgence at the close of the year, setting the stage for increased risk appetite and U.S. currency sales. Domestically, the IBGE (Brazil Institute of Geography and Statistics) announced that the unemployment rate in Brazil fell to 11.6% in the quarter ended in November, although 12.4 million Brazilians remain unemployed. Despite the decrease in unemployment, average income declined 4.5% from the previous quarter to R$ 2,444 - the lowest income in the historical period, which began in 2012. In other news, the main Sao Paulo stock index, the Bovespa, fell 0.3% on Friday, after three consecutive sessions of gains, as investors weighed the prospect of the Federal Reserve tightening monetary policy in the near future, as well as the implications of tensions in Eastern Europe. Following that, market players will see the publication of trade balance numbers, inflation data, monetary policy decisions, and PMIs data during the week.

  • Monday 01/31/2022 - BCB focus market readout  ¦ CAGED Net Payroll jobs  ¦ Debt to GDP ratio
  • Tuesday 02/01/2022 - Brazillian PPI (Dec) ¦ Markit Composite PMI (Jan) ¦ Markit Service  PMI (Jan)  ¦ Markit Manufacturing PMI (Jan) ¦ Manufacturing (Jan) ¦ Trade Balance(Jan) 
  • Wednesday 02/02/2022 - Industrial Output (Dec) ¦ Interest Rate Decision ¦ IPC-Fipe Inflation Index (Jan)
  • Friday 02/04/2022 – Auto Sales (Jan) ¦ Auto Production (Jan) ¦ CFTC BRL Speculative Net Positions (Jan)
 

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