Daily Market Pulse

The race for the white house continues


The U.S. dollar slipped 0.94% against its major counterparts on Thursday as the presidential race continues. Meanwhile, Trump is mounting legal challenges on voting counts in multiple states, so there is still a high degree of uncertainty on when the final result will be delivered. Yesterday, the Fed pledged again to do whatever it can in the coming months to help a U.S economic recovery which is threatened by a spreading Covid-19 pandemic. Today, the October labor market report is set to show a further slowing in the pace of the job recovery, with the market’s expectations for nonfarm payrolls set to have increased by 600,000 last month. Moreover, investors will remain alert to the counting of remaining ballots.


The EUR jumped 0.84% against its U.S counterpart on Thursday, with financial markets focused once again around the US election’s headlines, as the Democrat nominee moved closer to win the election. Though macroeconomic data and Covid-19 are still existing, the market seems to ignore it in the past few days. Nevertheless, Germany published September Factory Orders, which were up 0.5% over August and the EU released September Retail Sales, which were down 2% in the month, which was worse than anticipated. As cases of hospitalization due to Covid-19 increase rapidly and the mooted “second wave” looks to become a reality, France, Germany, and a handful of other European nations are implementing restrictive measures similar to those seen in March.


The GBP initially fell during the trading session on Thursday, but then turned around to close with modest gains of 1.21% against the USD. The British pound’s gains were catalyzed by Democrat Joe Biden, who inched close to victory in the U.S. presidential election, as well as developments from Brexit talks with several days of reporting progress. However, the Brexit seesaw and talks between the EU and UK are likely to come to the forefront again as soon as the winner of the U.S elections is defined.


The JPY traded 0.03% higher against the greenback earlier this morning, closing to an eight-month high. Japanese Prime Minister Yoshihide Suga has vowed to work closely with overseas authorities to keep currency moves stable because a strong yen is widely viewed as a threat to Japan’s economy. It is expected that the BoJ will deepen its negative interest rates if the Japanese yen spikes, albeit that option is also controversial given that the strain of years of ultra-low rates is wreaking financial institutions’ profits.


The CAD strengthened 0.70% against the USD on Thursday as the Federal Reserve (Fed) held its monetary policy unchanged, pressuring the greenback. As Biden edges closer to the White House, expectations for a possible agreement on the economic relief package grow. A large economic package would bolster the outlook for Canada's commodity-linked currency. Today, market participants will wait for the Job reports and the Ivey PMI, with both portraying the overall economic condition in Canada.


The MXN rose 1.11% against the greenback on Thursday for the third trading session in a row, reflecting a potential Biden victory and its positive impact on US-Mexico trade relations. The Mexican peso also found support after Consumer confidence in the country grew in October to levels not seen since the start of the health emergency caused by the Covid-19 epidemic, driven by a better prospect on the current and future economic situation. Today, investors will remain focused on the post-election fallout and are waiting for the Gross Fixed Investments figure.


The CNY traded down 0.27% breaking a sequence of six trading sessions of gains against the greenback. China stocks also fell earlier today after sharp losses in the healthcare and consumer sectors. However, both markets headed for weekly gains as the increasing prospects of a Joe Biden presidency in the U.S raised hopes of decreased tensions between the White House and Beijing. Thus, this potential positive prospect helped boost the currency to its highest level against the dollar since July 2018.


The BRL rose 2.45% against the USD on Thursday as Democratic candidate Joe Biden maintained a narrow lead in U.S. election vote counting. The Brazilian real also continued to find support from PMIs data. According to the HIS Markit Services PMI published late yesterday, Brazil’s services sector expanded in October at the fastest rate since January, with activity rising for the second straight month following Covid-19 induced contractions from March through to August. The latest PMIs data corroborate that the Brazilian economy is recovering faster than expected. Domestically, Brazil's central bank (BCB) president Roberto Campos Neto said the bank could withdraw its "forward guidance" pledge to keep interest rates low for a long time if the government does not slash public spending. The BCB’s president also warned that the Brazilian financial markets are at risk of disruption and distorted prices if the government fails to resume its reform agenda.


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