Global Themes

The multiday rally in the U.S. dollar abated amid a tentative cooling in global risks. The greenback surrendered ground to the euro and sterling while stronger oil markets buoyed the Canadian dollar. The buck was little changed against the yen while better performing global stocks boosted emerging markets. The dollar has strengthened for more than a week, as it’s seen as an oasis when global instability flares. Market sentiment perked up Tuesday but remained cautious on tentative hopes for deals to ease the U.S.-China trade war and potentially avert another partial shutdown of the U.S. government later this week. Little is on the global data calendar until inflation figures Wednesday from the U.S. and Britain and Thursday when Japan and Europe issue growth surveys.

CAD

A reduction in global risks, coupled with higher oil prices, helped the loonie outperform against its U.S. rival. Crude rallied more than 2% to above $53 on hopes that trade talks between the U.S. and China might soon bear some fruit. USDCAD has hovered around multiweek highs as many seek its safety from mounting signs of a slowing world economy. The loonie is likely to take its main cues for broader risk sentiment since Canada’s data calendar will be light until retail sales next week (Feb 22) and consumer inflation the week after (Feb 27).

EUR

The euro steadied but not before sinking to three-month lows. A lull in the European data calendar, coupled with constructive news on global trade and a seemingly lower risk of another U.S. government shutdown, offered a modicum of support to the beleaguered single currency. The euro slumped this week to mid-November lows but its ability, so far, to hold above last year’s bottom – which remains within reach – has helped it find a tentative floor.  

GBP

Sterling eked out a gain after falling to three-week lows. A better mood for global markets tempered investor appetite for safety in the greenback which translated into support for the pound. Next to impact the pound will be an Brexit update this week from Prime Minister Theresa May. A lack of clarity on Brexit has heightened economic uncertainty, as Britain logged the weakest growth (1.4%) in six years in 2018.

AUD

Cautious optimism in U.S.-China trade talks making progress this week buoyed risk sentiment and the likes of commodity currencies such as the Aussie dollar. That helped the Aussie rebound above its lowest level in more than a month. The Aussie veered sharply lower last week after the Reserve Bank of Australia shifted its policy stance into neutral, abandoning its rate hiking bias on account of rising global risks. The notion that lending rates could fall further from already record lows of 1.50% has changed the game for the Aussie.

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