Daily Market Pulse

Dollar takes a breather

USD

The U.S. dollar index, which measures the greenback's performance against a basket of six major currencies, suffered 0.04% during last week’s closing session. However, the greenback is expected to be back in demand with rising Treasury yields and cautious optimism, as investors assess the implications of the Fed’s faster tapering and early rate hikes against the emerging new virus Omicron. Despite mixed job statistics last week, the dollar's demand is being supported by a rise in U.S. interest rates, as aggressive Fed views remain alive and well. The headline Nonfarm Payrolls increased by 210K in November, compared to the 550K projected, but an upward revision to the prior number and an increase in the participation rate support the Fed's rate rise expectations. S&P 500 futures gained 0.05% so far for the day, reflecting broader market optimism. This week, market participants will be looking out for Goods and Service trade balance (Q3), Nonfarm Productivity (Q3), Consumer Price Index, and Consumer confidence index.

  • Tuesday 12/07/2021 - Goods and Services Trade Balance (Oct) ¦ Unit Labor Costs Q3 ¦ Non-Farm productivity Q3
  • Friday 12/10/2021 - Consumer Price Index (Nov) ¦ Consumer Price Index ex Food and Energy (Nov) ¦ Michigan Consumer Confidence Index (Dec)

EUR

The Euro gained 0.12% against the U.S. dollar towards the end of last week, but lost momentum in the early hours of Monday, falling back to the intraday low, down 0.17% a day before the European trading period. The recent weakening of the Euro might be attributed to statements made by European Central Bank (ECB) President Christine Lagarde. The ECB President refers to the new inflation concerns as a hump and expands the possibility for maintaining easy monetary policies. In contrast, the Fed's hawkish tone has intensified due to reduced unemployment figures and edging S&P futures. Aside from the ECB-Fed dispute, the Eurozone has been hit by a new Covid virus strain, and there are growing concerns over Evergande's payment delinquency in the grace period. Moving on, investors will keep an eye on German Factory Order data, which is expected at -0.5% against 1.3% from the previous month, as well as on ECB’s comments during the week.

  • Monday 12/06/2021 - Eurogroup meeting 
  • Tuesday 12/07/2021 - GDP Q3 ¦ ECOFin Meeting ¦ ZEW Survey
  • Thursday 12/09/2021 - Economic Bulletin

GBP

The Sterling slumped 0.52% against the greenback during Friday’s closing, followed by a modest rebound on Monday morning. However, it lacked any further breakthrough amid a strengthening U.S. dollar. Investors are certain that the Fed would take robust measures to combat excessive inflation, especially following the release of the Nonfarm payroll data last week. This, combined with Brexit uncertainty, had a negative impact on the Pound. Meanwhile, global risk sentiment has steadied as a result of preliminary observations of the new Omicron type, which has prompted a bullish tone in equity markets and offered a floor for the cable, limiting the downside. Looking ahead, investors will turn their focus to Construction PMI data and a speech by the Bank of England’s Deputy Governor Ben Broadbent to provide fresh impetus for Sterling's movements. 

  • Monday 12/06/2021 - Ben Broadbent’s Speech 
  • Tuesday 12/07/2021 - BRC Like-For-Like Retail Sales
  • Thursday 12/09/2021 -Financial Policy Committee Minutes ¦ Financial Policy Committee  Statement
  • Friday 12/10/2021 - Gross Domestic Product (Oct) ¦ Manufacturing Production (Oct) ¦ Industrial Production ¦ Manufacturing Production 

JPY

The Japanese Yen edged 0.27% higher against the U.S. Dollar on Friday’s closing season. The Yen lost some ground starting the first day of a new week, as the U.S. dollar maintained a buying tone during the European trading session and surged to intraday highs. A combination of factors has extended support for the U.S. dollar against the Yen. Global risk sentiment calmed as studies from South Africa suggested Omicron patients had minimal symptoms. The overall upbeat tone in the financial markets weakened the safe-haven Japanese yen. Bullish traders also followed the rise in U.S. Treasury bond rates from their lowest point since September. This, along with the likelihood of a quicker Fed policy tightening, helped reignite the U.S. dollar demand, which in turn acted against the Yen. Market participants, in the following sessions, will take cues from broader market sentiments and U.S. macro data release to provide a renewed impulse for the Japanese Yen. 

  • Monday 12/06/2021 - Overall household spending (Oct) 
  • Tuesday 12/07/2021 - GDP Q3 ¦ Trade balance 

CAD

The Loonie hit 0.26% down against the greenback on Friday’s closing. Loonie buyers gained some traction on the first day of the new week amid renewed momentum in WTI crude oil prices. The crude oil prices regained over 2% at the start of Monday so far and reinforced the Loonie against the U.S. dollar. Meanwhile, the economic data last week influenced the Loonie's upward trajectory, with the unemployment rate falling to 6% vs. predictions of 6.6% and 6.7% for the prior month, as well as 157k new job additions vs estimates of 35k and 31.2k before. Traders will now be looking forward to the Bank of Canada’s interest rate decision and Omicron virus updates during the week. 

  • Tuesday 12/07/2021 - International Merchandise Trade (Oct) 
  • Wednesday 12/08/2021 - BoC Interest rate decision ¦ BoC rate statement

MXN

The Mexican Peso declined 0.04% against the U.S. dollar during last week’s closing. Investors welcomed Victoria Rodriguez, a former official in Mexico's finance ministry, as the new head of the central bank. Rodriguez told legislators this week that she was dedicated to maintaining the independence of the Bank of Mexico, despite early fears about political intervention following her surprise appointment by President Andres Manuel Lopez Obrador. Broader Latam currencies saw tiny changes as investors speculated on whether dismal U.S. payroll statistics will persuade the Federal Reserve to postpone policy tightening plans. Moving ahead, this week’s U.S. economic releases, Omicron-related headlines, and Victoria Rodriguez’s fresh new perspective will provide a new drive for the Peso. 

  • Monday 12/06/2021 - Consumer Confidence Index (Nov)
  • Thursday 12/09/2021 - Core Inflation (Nov) ¦ Headline Inflation (Nov)
  • Friday 12/10/2021 - Industrial output (Oct) 

CNY

The Chinese Yuan edged 0.01% against the U.S. dollar at the closing of Friday’s session. On Monday, the offshore Yuan traded with minor gains/losses against the U.S. dollar, as policy easing discussions and fresh fears over China Evergrande's financial debt troubles did not influence the local currency. The People's Bank of China reduced the reserve requirement ratio (RRR) for banks by 50 basis points (bps) today, the second reduction this year, to encourage a sustained fall in borrowing costs. Analysts anticipate that the RRR reduction will boost the Yuan as the economic outlook improves. Meanwhile, the Yuan has recently benefited from strong business demand, as Chinese exporters use more of the local currency for different payments nearing the end of the year. 

  • Tuesday 12/07/2021 - Trade Balance (Nov) 
  • Thursday 12/09/2021 - Consumer Price Index (Nov) ¦ Producer Price Index (Nov) 

BRL

The Brazilian Real retreated 0.24% against the U.S. dollar on the previous week’s closing. In a week, the economy went into a technical recession, as amidst a rapid spreading of the Omicron variant all over the world, the Real crunched. However, the approval of the PEC of Precatório in the Senate brought slight relief to the quotation that closed last Friday. In addition to monitoring the PEC of Precatório in the Chamber, investors and traders will look forward to the next meeting of the Bank's Monetary Policy Committee (Copom) Central, which meets on the 7th and 8th of December to decide on the Selic. The expectation is of a further increase of 1.50% points, which would bring the interest rate to 9.25% per annum. It is worth wondering whether BCB will slow down monetary tightening to combat high inflation. Meanwhile, last Sunday, Bolsonaro said that Petrobras will announce price reductions for fuels this week. It is important to monitor how the state-owned company will implement this measure, and what its impact on the company's results will be.

  • Wednesday 12/08/2021 - Retail Sales (Oct) ¦ Interest rate decision 
  • Friday 12/10/2021 - IPCA Inflation (Nov) 
 

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