Currency Market Analysis

Jan 11, 2016 | Currency Market Analysis

Global Themes

The U.S. dollar was mixed but mostly firmer as a tentative improvement in market confidence lifted it against the euro and yen. Trade was lighter Monday with Japan on holiday. Though generally firmer, the U.S. currency eased off multiyear highs against its U.K. and Canadian rivals, while it edged below four-month highs against the Aussie dollar. The news from China overnight was mixed as the country’s stock market sank 5 percent but its currency gained 1% as Beijing reportedly intervened to support the yuan. Concerns about slowing growth in China and falling oil prices continued to cast a lingering pall over markets, keeping currencies on a volatile footing. Oil tipped below $33 in early trade Monday but slightly improved risk sentiment helped the Canadian dollar tread water above 12-year lows. Strong U.S. jobs data Friday also underpinned the greenback.


Modestly improved risk sentiment was enough to cause the euro to lose some ground against the U.S. dollar. European stocks were higher while U.S. futures pointed to Wall Street following suit when North American trade gets under way. The mostly risk-off feel to the new year has worked in the euro’s favor as it’s enticed skittish traders to shift the carry trade of selling the euro for better yielders into reverse.


Sterling steadied after falling to fresh five-year lows Monday against the U.S. dollar. The pound showed signs of consolidating its losses ahead of the Bank of England’s first announcement of the year on Thursday. Expectations that the BOE won’t lift its base rate from 0.5 percent this week or anytime soon have been a leading source of pound negativity. U.K. factory growth Tuesday is forecast to slow.


The Aussie dollar firmed after falling earlier Monday to four-month lows against its U.S. counterpart. Market confusion over China’s economic health has weighed heavily on the Aussie given Australia’s close trade ties to the world’s No. 2 economy. Weakness is on the cards for Australia’s jobs report on Thursday that’s forecast to show a net loss of 12,500 jobs in December which is seen moving unemployment up a notch to 5.9 percent.


Canada’s loonie regained some composure after falling earlier Monday to new 12-year lows. Loonie selling abated as risk sentiment improved and oil seesawed around $33. Weaker Canadian housing data Monday was generally offset by Friday’s jobs report that showed faster than expected hiring, keeping alive expectations that the Bank of Canada next week won’t cut interest rates from 0.50 percent.


The dollar was mixed, on mostly solid footing, benefiting from a nascent recovery is risk sentiment. Wall Street was on track for a rebound after Friday’s losses. The dollar has struggled to push higher despite data Friday that showed strong U.S. hiring of nearly 300,000 in December. Those with skeptical views on the dollar took some exception with the flat wage aspect of the jobs data that suggested the Fed might move a bit slower to raise interest rates in the months ahead. The dollar this week will take cues from remarks from Fed officials today and Wednesday, and Friday data on U.S. retail sales.

Get the daily currency market analysis in your Inbox

Published five days a week, this newsletter provides day-to-day trends and activities affecting the market in easy-to-understand snapshots.