Get Started

Currency Market Analysis

Aug 09, 2018 | Currency Market Analysis

Global Themes

The U.S. dollar maintained the upper hand as focus remained on trade tiffs and the strong shape of the world’s biggest economy. The dollar firmed against the euro and yen while sterling steadied above one-year lows. Canada’s dollar kept near two-week lows as subdued oil markets weighed. The biggest mover Thursday was New Zealand’s dollar which plunged 1.5% to 2 ½ year lows after a decidedly dovish policy decision from the nation’s central bank. New Zealand’s Reserve Bank left borrowing rates at 1.75% and said it expects to keep them there until 2020. Moreover, the RBNZ acknowledged that the next rate move could be either “up or down.” While firmer, the greenback kept to a slender range with traders awaiting U.S. inflation data Friday to help shape its short run prospects. Higher consumer prices, which are on the cards, would be supportive of both the dollar and the Fed raising rates further this year.


Mixed U.S. data largely offset to leave the dollar little changed and camped toward the upper end of its ranges. On the bright side, the latest weekly jobless claims were consistent with a strong labor market and a healthy economy as they printed at 213,000, one of the lowest levels since the late 1960s. Wholesale inflation cooled to an annual rate of 3.3% in July. The underlying trend of rising inflation appears intact given job market strength and the healthy economy. A reading of consumer inflation is due out Friday.


Canada’s dollar steadied after a midweek tumble knocked it to two-week lows. The loonie fell prey to weaker oil markets when crude sank 3% Wednesday on concern that Chinese appetite for energy may be cooling. Meanwhile, diplomatic sparring between Canada and Saudi Arabia also played out in a weaker loonie. A fundamental driver looms as the next driver of the Canadian currency with the nation’s July jobs report due Friday. Forecasts call for a gain of 17,000 jobs last month, an amount expected to lower unemployment by a tick to 5.9%.


The euro continued to fluctuate within a narrow band against the greenback, as the lack of much data this week has left EURUSD rangebound. Underlying sentiment remains bearish toward the euro, a reflection of America firing on more economic cylinders than Europe, and how the Fed anticipates further rate increases this year while the ECB intends to leave borrowing rates stationary.


Sterling showed tentative signs of stabilizing after dipping to fresh one-year lows overnight. But the path of least resistance remains lower for the U.K. currency given the uptick this week in Brexit uncertainty. Britain has yet to clinch an agreement on its future relationship with the EU upon its scheduled departure in March 2019. The uncertainty has taken a significant toll on the pound and continues to leave it vulnerable to further losses. Sterling appears to be catching a bit of a reprieve ahead of U.K. growth data Friday with forecasts calling for a better performance during the second quarter.


The kiwi dollar tumbled 1.5% to 2 ½ year lows after the nation’s central bank sketched a decidedly dovish outlook for area borrowing rates. As expected, the RBNZ Thursday left its base rate unchanged at 1.75%. The bank unveiled a central forecast laden with downside risks to the economy, particularly how global trade disputes could further crimp business confidence and lead firms to scale back hiring and investment. The big blow to the kiwi came from the RBNZ’s intention to leave rates on hold into 2020 when it said it could move them either “up or down.” Going forward, any escalation in trade tensions between the world’s biggest economies would loom has a major source of weakness for the kiwi.

Get the daily currency market analysis in your Inbox

Published five days a week, this newsletter provides day-to-day trends and activities affecting the market in easy-to-understand snapshots.