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Currency Market Analysis

Nov 08, 2019 | Currency Market Analysis

Global Themes

The U.S. dollar Friday squeezed more juice out of a rally that’s propelled it to multiweek peaks against the euro and sterling, and to its highest in five months against the yen. Broad gains also boosted the greenback versus Canada, Australia and emerging markets. The U.S.-China trade squabble remains front and center. While negotiations seem to be two steps toward a phase one deal, one step back, the sense that talks are headed in the right direction has eased worries about a U.S. slowdown. The euro wilted ahead of data next week that’s forecast to confirm that Germany descended into recession in the third quarter. Canada’s dollar fell on caution ahead of key jobs data today that wields the potential to make or break a local rate cut before Christmas. Out of the U.S. today, a 10 a.m. ET survey is forecast to show the rosiest consumer sentiment in months.


The U.K. pound suffered a bit of a Bank of England hangover as it kept in its biggest hole in two weeks against its U.S. rival. The BOE left borrowing rates unchanged at 0.75% this week but markets were surprised that two of the nine officials voted for a 25 basis point rate cut to 0.50%. The perception of Britain’s central bank pivoting in a dovish direction helped set the table for a sterling-negative rate cut in the months ahead.


Canada’s dollar tumbled to more than three-week lows after disappointing jobs data strengthened the case for central bankers to lower borrowing rates. Canada unexpectedly shed 1,800 jobs in October, compared to forecast of a modest increase. The details were mixed as the tiny loss of jobs wasn’t enough to raise unemployment which steadied at a historically low 5.5%. Wage growth ticked up to 4.4%, an elevated level that bodes well for consumer spending.


The euro fell to three-week lows against the greenback as easing trade tensions put the spotlight back on the bloc’s weak fundamentals. The German economy could get slapped with the dreaded ‘R’ word next week. A Nov. 1 report is forecast to show Germany contracted, albeit at a mild 0.1%, for a second straight quarter, the technical definition of recession. However, if the data should surprise to the upside, it would point to stabilization taking hold in Europe which would be positive for the euro.

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