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Currency Market Analysis

Feb 08, 2019 | Currency Market Analysis

Global Themes

America’s rejuvenated dollar was neither up nor down Friday as it consolidated gains that have pushed it to multiweek peaks. The buck was largely flat against the euro, yen and sterling. Subdued global markets and lower oil kept the Canadian dollar pinned near two-week lows. The rally that propelled the dollar broadly higher last year has enjoyed renewed life with U.S. growth remaining solid while peers abroad lose momentum. The dollar rally stumbled last week after the Fed turned cautious and removed near-term interest rate hikes from the table. But the hit to the greenback from the Fed’s abrupt policy shift has been somewhat neutralized as central banks abroad acknowledge rising risks. Canada’s dollar could see some volatility today as the nation issues its January jobs report. Forecasts call for unemployment to rise from record lows of 5.6%. 


The sputtering euro caught some breath after slumping to two-week lows. A better day for Germany’s fragile economy helped to ease pressure on the single currency. Germany’s slowing economy celebrated a rare of late win as the nation’s trade surplus unexpectedly widened to €19.4 billion in December from a revised €18.9 in November. Thursday (Feb 14) looms large for the euro when the bloc publishes fourth quarter growth.


Sterling steadied after a slide to two-week lows. The pound continues to serve as a Brexit barometer. When it appears that Britain might exit the bloc with a trade deal, the pound tends to strengthen. But when it seems like Britain could be headed for a cliff’s edge, no-deal exit, the pound tends to falter. Britain’s prime minister this week restarted talks with the EU that still haven’t produced a Brexit breakthrough, though the leaders agreed to continue speaking. The coming week features critical U.K. numbers Monday on Q4 growth, Wednesday on inflation and Friday on retail sales.


A bullish start to the year for Canada’s job market helped to pull the loonie out of its biggest hole in weeks. Canada’s netted some 66,800 jobs in January which was more than 10 times stronger than forecasts of 6,000. Unemployment rose two ticks above record lows to 5.8% but for good reason as the size of the workforce grew. Wages also rose, though in line with tame inflation. Add it all up and it made for a more compelling case for the Bank of Canada to raise interest rates this year.

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