Currency Market Analysis

Dec 21, 2015 | Currency Market Analysis

Global Themes

The U.S. dollar parted with some of its Federal Reserve-inspired gains of the week before in light holiday trade. Market movements were mostly a reflection of late year position squaring and profit-taking after another year of broad outperformance by the U.S. currency. America’s best-in-class fundamentals bodes well for the dollar to extend its streak of dominance into the opening quarter of 2016. The coming holiday-abbreviated weeks could see choppy, erratic market movements which is typical when volumes are lower and volatility tends to be higher.


With economic fundamentals taking a back seat to technicals and year-end position squaring, the euro managed to test the northern limits of its range. Technicals may not get the euro very far after weekend elections in Spain saw the ruling conservative party stop short of a majority victory in parliament. 


Sterling stabilized after plummeting last week to its weakest in eight months. Data Monday showed a gauge of U.K. consumer spending improved in November though not enough to quell mounting concerns about the fragile shape of Europe’s No. 3 economy


The depressed price of oil kept a stiff headwind on the Canadian currency which snuggled close to Friday’s fresh 11-year lows. Oil weakened below $35, down more than a percent in early trade. Daunting risk events loom Wednesday when Canada releases monthly data for October on growth and retail sales.


The dollar retreated from two-week highs against a currency basket, falling prey to end of year profit-taking and window dressing. The final estimate of U.S. growth comes due Tuesday and is forecast to the world’s biggest economy grew at an annual rate of 2.1 percent during the third quarter. Wednesday brings critical readings on personal income and spending and consumer morale. 

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