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Currency Market Analysis

Feb 06, 2019 | Currency Market Analysis

Global Themes

The U.S. dollar trampled over its Australian counterpart while it maintained a broadly improved bias. The greenback fell against the yen but pushed higher against the euro and Canadian dollar. Sterling was flat after a sharp slide this week to multiweek lows. Emerging markets also tumbled against the dollar. A sharp 1.5% slide in the Aussie dollar had it on track for its worst day in a year. The Aussie collapsed after Australia’s central bank governor, Philip Lowe, noted rising growth risks and opened the door to a potential rate cut. The U.S. dollar has fared better lately as global data cast the world’s biggest economy in a rosier light. The strongest U.S. job growth in almost a year contrast data today from Germany that showed a surprise plunge in industrial orders. Today’s data docket features America’s trade deficit and Canada’s Ivey business survey.


The Aussie dollar was slammed after the head of the nation’s central bank hinted at a potential rate cut as the next policy move. The dovish remarks overnight from Philip Lowe were surprising and came a day after the RBA left its benchmark lending rate unchanged at 1.50%, a record low, and stopped well short of telegraphing lower rate policy. The 1.5% plunge the Aussie has endured has it pacing its worst day in a year. The fall drove the Aussie to its lowest in nearly two weeks, a favorable move for Aussie buyers to take some cover. 


The U.S. dollar got a boost from more reassuring data from the world’s biggest economy. America’s trade deficit narrowed more than expected to $49.3 billion in November from a $55.7 billion shortfall in October. The smaller trade gap bodes better for U.S. growth during the final quarter of 2018. While the greenback has fared better of late, headwinds could resume if the economy starts to show signs of succumbing to the global slowdown.


Sterling stabilized after a rout this week to two-week lows. The pound suffered a one-two punch this week in worrisome data on Britain’s economy-driving serves sector, which stalled to begin the year, and uncertainty over the fate of Brexit negotiations between the U.K. prime minister and the EU. The pound will look for a fundamental steer Thursday in the Bank of England which is all but certain to keep interest rates at 0.75% given the political and economic fog that Brexit represents.


Dismal data from Europe’s largest economy drove the euro through a key floor to its lowest in nearly two weeks. German industrial orders tumbled some 1.6% in December compared to forecasts of a modest gain. Somewhat easing the blow to the euro was an upward revision to the November number to a smaller decline. The steady parade of weak data from Europe is consistent with the ECB maintaining low rates for longer which is bad for the euro’s allure.


Canada’s dollar slid to one-week lows on the back of lower oil while it also fell in sympathy with commodity cousins from Down Under. Oil pared some of its decline but remained in the red and below $54. Canada’s status as an influential oil producer and exporter tends to see its value fluctuate with commodities. 

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