Currency Market Analysis

Sep 01, 2015 | Currency Market Analysis

Global Themes


The euro firmed out of the gate to September as global growth worries buoyed low-yielding units that are used to funded riskier bets during calmer times. The euro also benefited from a surprise decline in euro zone unemployment to 10.9% in July, a February 2012 low, from 11.1%. The European Central Bank (ECB) on Thursday looms as a daunting risk event for the euro. Should the ECB sound the alarms over global risks posing a threat to its recovery or signal a willingness to deploy stronger stimulus it would renew headwinds on the euro.


Sterling hit 12-week lows as an unexpected slowdown in the nation’s manufacturing sector suggested global headwinds were having an impact on Europe’s third-biggest economy. Britain’s factory PMI unexpectedly slowed to 51.5 in August compared to forecasts of 52.0. The lackluster data suggested Britain would hold off on a rate hike until well into 2016, weighing on the pound.


The Aussie dollar overnight managed to firm above six-year lows after the nation’s central bank held rates at 2.0 percent and sounded a status quo message in its statement. However, the Aussie slipped anew after China let loose disappointing data on its factory sector, pointing to ongoing weakness in its top export market. By not sounding fresh worry over China has the Aussie weakened to more acceptable levels for the RBA?


It’s official: Canada spent the first six months of 2015 in recession with growth down 0.5 percent during the second quarter which followed a 0.8 percent decline in Q1. But the Q2 news wasn’t as bad as forecasts of a 1.0 percent fall which helped the loonie pare losses. The data can help tamp down on loonie negativity. However, bearish sentiment should persist since the recent slide in oil doesn’t bode well for Canada’s Q3 performance. More risk events loom with Canadian trade Thursday and employment Friday.


Global growth jitters tagged along as September got underway, weighing generally on the dollar, though it outperformed risky peers from Canada and Australia. Dollar bulls this week have their hopes pinned to another solid jobs report on Friday which, if realized, would strengthen the case for an imminent U.S. rate hike. But if the jobs report should disappoint, the broadly weighted dollar index would be at risk of adding to its August losses.

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