Currency Market Analysis

Dec 31, 2015 | Currency Market Analysis

Global Themes

The dollar was mixed to firmer on the last day of the year, up against the euro but down versus the safer yen in generally risk-averse trade. For the year, the dollar was set to cross the finish line first, though with a smaller margin of victory after seeing its gains wane over the final month of the year. Midnight ushers in a new year and a fresh start, but market risk factors over sluggish global growth and geopolitical uncertainty will linger, which could set currencies on an unpredictable path. 


The euro was poised to end a down year on a down note. For the month though, the euro logged a winning December after the European Central Bank deployed fresh stimulus that stopped short of shocking and awing. 2015 got under way with the euro above $1.20. The degree to which monetary policies diverge between Europe and the U.S. will be a driving force for euro-dollar in 2016. Will 2016 saddle the euro with another multi-cent swoon? 


The loonie steadied on New Year's Eve but remained on wobbly ground with oil keeping in the red, down nearly a percent to below $37. The loonie fell far and fast in 2015, having started the year below C$1.17. The loonie was throttled by plunging oil prices which lead to multiple rate cuts by the Bank of Canada, and a first half recession for the Canadian economy. Absent a turnaround in oil, the loonie is at risk of deepening its slide over coming months. 


The dollar firmed on the final day of a strong year with markets looking ahead to 2016 when the Federal Reserve has penciled in a series of dollar-bolstering interest rate rises. The dollar was unfazed by data today that showed weekly jobless claims jumped 20,000 to 287,000 - keeping to a healthy range and near historic lows. 2016 looks bright for the buck but it will need the cooperation of a better economic backdrop at home and abroad for it to sustain its run. 

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