The U.S. dollar index, a benchmark used to value the greenback against a basket of six major currencies, advanced 0.58% by Friday’s close, amid strong job reports in the U.S. lifting Treasury Yields and expectations of policymakers adjusting monetary policy before previously anticipated. The latest job report showed that the economy created 940k new jobs in July, exceeding expectations of 850k, while June figures were revised up significantly from 850k to 938k. The U.S. Unemployment rate was published at 5.4%, improving from 5.9% posted in June and closer to the 3.8% defined by Richard Clarifa, Fed Vice Chair, during his speech last Wednesday. The global market mood progressively improves, although risks remain latent around a possible economic stall from China which has eased the prospects of demand for commodities, pushing prices lower. However, the recent surge in global Covid cases keeps investors in a constant reassessment of the Fed’s hawkish expectations. Meanwhile, optimism surrounding the USD 1 trillion infrastructure bill continues to support the market mood. Lawmakers continue to make progress but its approval from the Senate is still pending and Biden’s administration is aiming to get this approved before the August recess. Any developments on this front will have a direct impact on markets. The week ahead brings an interesting flow of data from the U.S., especially with reference to the Consumer Price Index due to be released on Wednesday, Producer Price Index to be released on Thursday, and Michigan Consumer Sentiment Index on Friday.
- On Tuesday(08/10): Nonfarm Productivity ¦ Unit Labor Costs
- On Wednesday (08/11): Monthly Budget Statement
- On Thursday (08/12): Consumer Price Index Core ¦ Producer Price index ex Food & Energy ¦ Consumer Price index n.s.a
- On Friday (08/13): Michigan Consumer Sentiment Index
The common currency fell 0.59% after upbeat nonfarm payrolls pushed U.S. treasuries to yield higher bolstering demand for dollars during Friday’s trading session. The mood remains constructive in the old continent, with cases progressively reducing in broader terms (below 100k daily cases), but we have witnessed interesting variations in France where cases have spiked while Germany remains low. This week, investors will eye morale indicators, with Sentix Investor confidence due later today and the “ZEW survey - Economic sentiment” tomorrow for both the Bloc and Germany. The ZEW survey brings with it high expectations amid the constructive mood, expected to increase from 61.2 in July to 72 in August. Moreover, Industrial Production and Trade balance is due on Thursday and Friday respectively.
- On Monday (08/09): Sentix Investor Confidence
- On Tuesday (08/10): ZEW Survey - Economic Sentiment
- On Thursday (08/12): Industrial Production
- On Friday (08/13): Trade Balance
The British Pound remained under pressure against the dollar, retracing 0.37% amid better than expected nonfarm payrolls and U.K political concerns that keep the Brits uncertain. Prime Minister Boris Johnson has reportedly threatened to demote Finance Minister Rishi Sunak in a fiery meeting in Downing Street, following the leak of a letter from Sunak that criticized the borders policy in the U.K. without the acknowledgment of the Prime Minister. In response, the Tory benchers have warned the Prime Minister about demoting Sunak, building up tension within the party. Moreover, Like for Like retail sales figures are due later today, which is expecting a 13.1% annual growth, while on Thursday Preliminary Gross Domestic Product and manufacturing and production indexes will provide a good peek at the performance of the British economy.
- On Monday (08/09): BRC Like-for-like Retail Sales
- On Wednesday (08/11): NIESR GDP Estimate
- On Thursday (08/12): Manufacturing Production ¦ Industrial Production ¦ Gross Domestic Product (PREL)
The Japanese Yen closed the previous week under significant pressure, recording three straight days of losses amid strong nonfarm payrolls and bolstering U.S. treasury yields weighing on the Yen. However, the Yen seems to have taken a breather as investors take profit from the previous move and Covid jitters support the safe-haven currency. Coming up, Current account figures are due later today, followed by Bank lending and Trade balance. On Wednesday, we expect the Producer Price index as the most relevant release for the week and preliminary growth figures.
- On Monday (08/09): Current Account ¦ Bank Lending ¦ Trade Balance
- On Thursday (08/12): Producer Price Index ¦ Gross Domestic Product (PREL)
The Loonie remained subdued, following the job report standoff between the U.S. and Canada, where the dollar came on top. Last week, expectations built up on Friday for USDCAD traders amid the release of job reports figures that occurred simultaneously. The U.S. nonfarm payrolls exceeded expectations, releasing 940k new jobs in July vs 850k previously anticipated, while previous figures were revised up to 938k from 850k. The U.S. Unemployment rate was set at 5.4%, better than the 5.7% expected, and improved from the 5.9% figure previously released. On the other hand, the Canadian Net Change in Employment came in soft with a light 94k, while markets expected 177k, whilst the Unemployment rate increased from 7.4% to 7.5%. The contracts result in overweight the dollar in addition to fear of China’s economic stall, which is keeping the commodities on edge. The week ahead will bring relevant inflation data on Wednesday with the release of the BoC Consumer Price index, while Retail Sales on Friday are due to come from negative results in May.
- On Monday (08/09): Housing Starts
The Mexican Peso retraced 0.68% on Friday against the dollar amid a broader greenback strength following job reports and nonfarm payrolls in the United States. Additionally, Mexico’s national council for the evaluation of social developments policy has released a report showing that the Covid-19 pandemic has led to 3.8 million people falling into poverty. The Mexican authorities say that the proportion of people living in poverty rose from 41.9% in 2018 to 43.9% of the population in 2020. Moreover, the population living in extreme poverty now sits at a record 8.5% of the population, with indicators showing that 26 states saw an increase in extreme poverty. Coming up, headline inflation later today will take the stage ahead of Thursday's Banxico Interest Rate Decision.
- On Monday (08/09): Consumer Price Index ¦ Bi-weekly CPI
- On Tuesday (08/10): Nominal Wages
- On Wednesday (08/11): Industrial Production ¦ Manufacturing Production
- On Thursday (08/12): Formal Job Creation Total ¦ Overnight Rate ¦ Interest Rate Decision
- On Monday (08/23): Retail Sales
The Chinese Yuan stepped back on Friday following the release of nonfarm payrolls and job reports in the U.S., smashing expectations and bolstering the demand for dollars while pushing treasury yields higher. However, the market mood remains tepid amid a sell-off in Commodities and concerns around a Chinese economic stall. Asian stocks seem to have recovered from early losses and are looking to stabilize while commodities prices attempt a bounceback. On the data front, the week kicked off with positive inflation data, with Chinese Consumer Price Index figures and Producer Price index figures surprising on the upside, beating expectations modestly.
- On Monday (08/09): Consumer Price Index ¦ Producer Price Index ¦
- On Monday (08/10): FDI - Foreign Direct Investment
The Brazilian Real fell 2.51% during Friday’s trading session against the dollar amid NFP figures surprising on the upside with a significant margin. The euphoria for dollars comes off the back of increasing treasury yields as expectations of monetary policy adjustment suggest it may come before the previously anticipated date, nurturing the broader risk-on sentiment in global markets. However, risks remain latent with growing Covid pressures and political pressures in Brazil amid electoral reform in the country. The special committee in Brazil’s Federal chamber of deputies rejected a constitutional reform, which would have introduced printed receipts as part of the country’s electronic voting system. Additionally, the Brazil - China Chamber of Commerce reported that Chinese investments in Brazil have declined 35.4%, while in Latin America it reported a 40.4% reduction in 2020 compared with 2019.
- On Monday (08/09): FGV Inflation Report ¦
- On Tuesday (08/10): FGV Consumer Price Index ¦ IBGE Inflation Report IPCA
- On Wednesday (08/11): Retail Sales
- On Thursday (08/12): IBGE Services Sector Volume
- On Friday (08/13): Economic Activity