Update from North America

Quite FX, stocks rise, all eyes on Friday's NFPs

3 min read

The U.S. Dollar is trading in flat ranges after the rally for other currencies against it ceased with markets questioning how economic policy goals could shift going forward.

Investors seemed to welcome the results of the elections while plenty of analysts pointed to the potential for major friction as we enter a period of divided government. Previously unfavored markets gained ground at the expense of U.S.-listed chipmakers, which some economists predict could be affected by a push for regulating artificial intelligence and the industry as a whole. If enthusiasm fades, maybe the Buck can recover some of the value it lost, but it is not being helped by economic indicators.

Yesterday’s release of October Purchasing Managers Index results showed less expansion than expected and drops all across Institute of Supply Management indices on services, prices paid, new orders, and employment. The decline from September seemed significant, which may limit the “hawkishness” of some Fed members as they review data. If the economy is slowing down, it gives less of an incentive to hike interest rates for what remains of the year, certainly a catalyst for further USD weakening. Tomorrow will be the grand finale with nonfarm payrolls and the employment situation report.

What to Watch This Week…

The complete Economic Calendar can be found here.


EUR

The Euro continues to be in recovery mode and is getting close to returning to levels last seen at the start of October, a month during which it depreciated by as much as 1.0%. As investors rotated their risk-taking, European stocks benefitted greatly with the Stoxx 600 surpassing its previous closing high. Earlier, Producer Price Index for September showed the Euro-zone as a whole saw a big jump of 2.5% in comparison to the previous reading of 2.0%. The annual average now stands at 11.1%, something that has deeply hurt the region’s ability to foster economic growth. We shall see if maybe there are surprises awaiting us on that front as next week we see Gross Domestic Product numbers from the third quarter of the year.

MXN

The Mexican Peso is now 1.2% stronger than it was at the start of the month with the advance coming ahead of the central bank Banxico’s monetary policy decision announcement. Later today at 2PM, officials will explain their thinking and offer guidance while most traders and economists expect a relatively confident tone. Last week’s impressive showing of the fastest pace of quarterly GDP growth in three years is adding to bets that Banxico will be extending its pause on making interest rate moves. Unlike other central banks tackling inflationary pressures, Banxico has been slashing interest rates, but has not done so since May. Perhaps MXN has room to gain if officials hint at being more concerned with price growth down the line.