Daily Market Pulse

Hurricane Delta on the radar


U.S. President Donald Trump said yesterday that talks with Congress had restarted on targeted fiscal relief, after abruptly calling off negotiations earlier this week. Also, Trump threatened to continue using tariffs on China should he win a second term. However, neither piece of news had a great impact on the currency’s domestic market, hence the USD closed flat on Thursday. Also, the market seems to have ignored the weekly U.S jobless claim numbers, which showed a further 840,000 initial unemployment claims in the seven days to 3rd October and above 20k from previously forecast. Today, market participants will closely watch the oil future market in New York as Hurricane Delta is forecast to strength and slam into the already battered Louisiana coast throughout the day. On Thursday, West Texas Intermediate (WTI) oil futures price rose 3.1% with Delta forcing operators to shut-in almost 92% of crude output in the Gulf of Mexico. On the economic data front, August’s U.S wholesale sales numbers are expected to be released today by the U.S. Census Bureau.


The EUR rallied initially during the trading session, but it failed to hold onto its recent gains and edged 0.07% down against the greenback on Thursday. Given the lack of fresh news from Europe, aside from the second wave of the Covid-19 outbreak on the continent, as well as the fact that the European Union signed an advance purchase agreement for 200 million doses of Johnson & Johnson's vaccine candidate, today markets will focus on new hopes of additional U.S stimulus after Trump signaled that talks with Congress had restarted again. On the data front, today's schedule includes industrial production data for Italy and France.


The Sterling traded 0.12% higher against the USD on Thursday, following a rally started the day before. The GBP has been rising amid hopes for a U.S fiscal stimulus package, however, recent UK GDP data below market forecast (4.6%) might cool down further gain against the greenback in the trading session today. The recently published UK data showed that in August the UK economy grew 2.1% on a monthly basis, as the country’s gradual recovery from the Covid-19 crisis continued, although at a slightly slower pace. According to the Office for National Statistics, it follows an expansion of 6.4% in July, 9.1% in June, and 2.7% in May, following a record 19.5% plunge in April. However, the figure also showed that August GDP remained 9.2% lower than in February before the full impact of the pandemic was felt. 


The Japanese yen closed flat and was not able to materialize gains after the Japan Economy Watcher Survey came in at 49.3, above forecasts (40) in September.  According to the survey, Japan's service sector sentiment rose in September to the highest level in two and a half years, suggesting that the economy is gradually recovering from the devastating impact of the Covid-19 pandemic. On the other hand, earlier this morning, it was released that Japanese household spending fell 6.9% in August from a year earlier, which adds further pressure on the country’s already very low inflation, even amid a massive monetary stimulus program.


The CAD saw new gains of 0.45% against the USD for the second consecutive session on Thursday, with the risk-on sentiment weighing on the safe-haven USD and the CAD holding its modest gains after Macklem’s speech. Also, in the last trading session, a strong rally of 3.1% in crude oil prices provided a boost to the commodity-sensitive Loonie. The day also was marked by Tiff Macklem, the governor of the Bank of Canada, speaking by video conference to a financial risk management group. Macklem reiterated that it “seems certain” the country would exit with higher levels of government debt. He also said that a full recovery from the Covid-19 crisis would take a long time and noted that many risks remain, particularly as the second wave of infections takes hold in parts of Canada. Later today, September’s Canadian labor market figures are expected to be released.


The Mexican peso strengthened 0.38% against the USD in a volatile trading session on Thursday as risk-on sentiment started to prevail in the global market. The MXN also found support after official data reported Mexican inflation cooled to 4.01% in the year through September as consumer prices for energy dropped and food price rises were lower. Today, is quiet on the economic data front, with the MXN mostly being driven by new developments in U.S stimulus talks.


The Golden Week is over and China’s market reopened. Earlier this morning, China shares, and the CNY ended higher, with investors being encouraged by official data that showed signs of economic recovery and a rebound in tourism during the Golden Week. The CNY’s leap of almost 1.20%, was partly a catch-up since the offshore yuan has gained against a softening USD during the week, as well as on the back of U.S election poll surveys, which provide indications that Biden's lead in the polls is raising the stakes for a more stable Chinese-American relationship. It is worth highlighting that the CNY’s leap was its biggest daily jump in nearly two years and signaled that policymakers in China don't mind its rise.


The volume of retail sales in August reached its peak in the time series of IBGE’s Monthly Survey of Trade and it helped the BRL to gain some ground against the USD. Yesterday, the BRL closed 0.20% up after IBGE reported that in August, the volume of retail trade sales in Brazil increased 3.4% against July, in the seasonally adjusted series, after an increase of 5.0% in July 2020. However, concerns continue about the country’s public finance limiting further gains. On the external front, helping the BRL, hope for a U.S. stimulus package before the elections returns after Trump signals that talks with the Democrats are back on. Today, the IBGE presents the original and adjusted Extended National Consumer Price Index (IPCA) series and provides a snapshot of how the domestic prices were impacted in September under a weakened BRL and accelerated economic recovery. 


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