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Currency Market Analysis

Mar 18, 2019 | Currency Market Analysis

Global Themes

A mostly weaker U.S. dollar slipped to two-week lows ahead of a midweek Fed meeting. The greenback nursed declines against the euro, loonie and Aussie dollar, but firmed against the U.K. pound. Emerging markets also outperformed. A run of lackluster U.S. data has dampened optimism in the world’s biggest economy. That has the market positioned for the Fed to leave borrowing rates unchanged this week and signal it could be some time before it contemplates a rate hike. The buck has lost ground in the wake of tepid data on job growth, inflation and consumer spending. The Fed also will publish new projections for the economy and indicate whether it still expects to raise rates this year. A message of slower growth and fewer rate hikes ahead could prove a recipe for a weaker U.S. dollar. The Fed will render its decision Wednesday at 2 p.m. ET.

EUR

The euro rose to two-week highs as it benefited from greenback weakness ahead of the Fed this week. America’s central bank is not expected to raise rates or hint at an increase on the horizon after the world’s biggest economy slowed over the latter part of 2018, a trend that appears to have extended into the first quarter. Expectations of steady monetary policy on both sides of the Atlantic over the foreseeable future have largely kept EURUSD to a range.

CAD

Canada’s dollar firmed in line with oil markets. The loonie’s main sights are set on Friday data that will shed light on whether Canada’s economy slowed further during the first quarter. February inflation is expected to stick near 15-month lows of 1.4%. Retail sales also will be important, especially in the wake of a hiring boom in Canada over recent months that’s helped to fatten consumers’ wallets. Oil prices early Monday held above $58, not far from 2019 peaks.

GBP

Sterling softened ahead of another week of crucial Brexit events. The U.K. is expected to vote again on the prime minister’s twice-defeated Brexit deal. The vote is expected by Wednesday. If the third time is a charm and it passes Parliament, an elated Theresa May would likely ask the EU later this week for permission to push back its March 29 departure by several weeks or months. However, if the prime minister’s deal should suffer a third defeat, Mrs. May would likely ask the EU for a lengthier delay, as lawmakers would need time to determine the next steps. Consequently, the wild up and down swings sterling has experienced over recent weeks may persist.


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