Global Themes

The U.S. dollar got off to a quick start to the week on evidence that the world’s biggest economy remains in pole position. Across the board gains boosted the greenback against the euro, yen and sterling. Higher oil above $55 helped to slow the Canadian dollar’s decline. The buck is attracting some buying interest after data last week showed the U.S. economy started 2019 with its best monthly hiring spree in nearly a year. Strong job growth above 300,000 stands in contrast to mounting evidence of economies abroad losing steam. While the data didn’t alter expectations that U.S. interest rates would remain steady over the near term, it helped to dampen talk of the next move being a cut. The spotlight this week will be on U.S. factory and services growth, the Bank of England and Canada’s monthly jobs report Friday.

CAD

Canada’s dollar edged down from multimonth highs against the broadly stronger greenback. Downside for the loonie was limited by buoyant oil markets with crude above $55, a multimonth high. Canadian fundamentals will be in focus this week with data Wednesday on trade and Friday on employment. January hiring is forecast to slow to an increase of 8,000 from more than 9,000 in December. Unemployment is expected to inch up from record lows to a still-healthy 5.7%.

JPY

The yen hovered near lows for the year against the dollar, hurt by last week’s U.S. jobs report that pushed Treasury yields higher and above four-week lows of 2.61%. The yield on America’s benchmark bond, the 10-year, reached 2.70% this morning which burnished the appeal of dollar-based assets. Much of Asia will be on holiday this week for the Lunar New Year. Beware, though, as less liquid markets sometimes exacerbate exchange-rate volatility. 

EUR

The euro started the week with a decline after a gauge of area inflation slowed more than expected which shined a brighter spotlight on weaker fundamentals in Europe compared to the U.S. Euro zone wholesale inflation slowed to a an annual rate of 3% in December, down from 4% in November. Fragility is on the cards for data Tuesday on euro zone consumer spending and services growth. 

GBP

Sterling slipped about 2 cents below recent three-month peaks. Focus for all things U.K. this week will be on the Bank of England and Theresa May who heads back to Brussels to try to renegotiate a Brexit deal that a divided Parliament might embrace. Come Thursday, the BOE is expected to leave its key rate at 0.75%. Data today argued against a rate hike anytime soon as construction growth slowed more than expected. The data added to expectations that Britain’s more influential services sector PMI Tuesday might also weaken.

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