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Currency Market Analysis

Apr 17, 2019 | Currency Market Analysis

Global Themes

A wave of negative news out of Europe spurred a stampede into safer bets, driving the U.S. dollar broadly higher. The greenback climbed to one- and two-week highs against the euro and sterling after data depicted chronic weakness in Germany, the heart and soul of Europe’s economy. Factory growth in Germany contracted for the fourth time in as many months in April. The data validated the dimmer views that a “significant minority” of ECB officials reportedly have about the growth outlook. Sterling slid in sympathy with the euro, though the pace of decline was slowed by data showing surprisingly brisk U.K. consumer spending. Lower oil below $64 and a stronger greenback pulled the loonie down from four-week highs. The buck’s quick start to the day is likely to be tested by U.S. retail sales and perhaps the release of the redacted Mueller report.

GBP

The U.K. pound fell below a key psychological floor to its lowest in two weeks. The pound was injured by fresh signs of weakness in core European nations like Germany whose factory sector remained stuck in reverse for a fourth month in a row. European weakness overshadowed bullish news on the U.K. consumer as retail sales jumped more than 1% in March. The data offered evidence of higher wages and tame inflation starting to translate into faster consumer spending. 

CAD

Canada’s dollar retreated from four-week highs against a reenergized U.S. dollar. The greenback enjoyed multidimensional gains, benefiting as a haven from weakness in big Europe and signs of the U.S. economy on the upshift after a recent slowdown. The loonie’s decline was slowed a bit by encouraging news showing Canadian retail sales rose by a solid 0.8% in February which proved two times stronger than forecasts of a 0.4% increase. Coming on the heels of reassuring news on Canadian trade and inflation, it cemented expectations for the Bank of Canada to leave interest rates unchanged at 1.75% at its coming meeting on April 24.

USD

The dollar cleared key economic hurdles with ease Thursday, though a potentially political one loomed in the day ahead. The dollar enjoyed a multidimensional bounce as European data disappointed and spurred a flight to quality in the greenback. The dollar also cheered bullish news on the U.S. economy that depicted growth on the upshift after a recent soft patch. American consumers went on quite a spending spree with retail sales jumping 1.6% in March, the strongest since September 2017. The job market also impressed with weekly jobless claims spending a second consecutive week below the key 200,000 level, and lowest since the 1960s. The dollar’s momentum could see some political testing today in the release of the Mueller report. 


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