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Currency Market Analysis

Nov 25, 2019 | Currency Market Analysis

Global Themes

The U.S. dollar remained in broadly positive territory after ending the previous week ahead of its rivals. The buck Monday notched at least one-week highs against the euro and yen and held aloft near multiweek peaks against the Canadian dollar. Sterling was an outlier as it posted gains against the greenback, buoyed by opinion polls suggesting a majority victory for Conservatives in next month’s general election. A spotlight on fundamentals is casting the U.S. economy and by extension its currency in a better light that struggling economies abroad. The resilient shape of consumer spending bodes well for continued, if slower, U.S. growth going forward. By contrast, Europe’s economy is expected to remain in a low gear over the foreseeable future. The holiday-abbreviated last week of the month features U.S. data on consumer confidence, personal spending and a second estimate of third quarter growth.

CAD

While little changed, the Canadian dollar remained somewhat on the defensive and not far from six-week lows against its U.S. peer. Canada’s economy this month has shown signs of succumbing to global weakness. Recent data pointed to a loss of momentum in the Canadian economy as hiring contracted along with retail spending. Data this Friday forecasts that Canada’s economy grew at a 1.2% annual rate during the third quarter from a robust 3.7% in the spring. A weaker than expected print would strengthen the case for the Bank of Canada to cut interest rates from 1.75% over coming months.

EUR

The euro fell to 1 ½ week lows as market focus turned to fundamentals. While Germany’s influential Ifo survey of business confidence brightened in November, the overall level (95) was consistent with challenging economic times for the bloc’s biggest economy. The big day on Europe’s economic calendar this week will be Friday when the euro zone issues top tier numbers on inflation and unemployment. Down about 1.3% in November, the euro is poised for its worst performance in months.

GBP

Sterling rebounded from more than one-week lows as attention shifted to politics and Conservative’s seemingly commanding lead in opinion polls ahead of Britain’s Dec. 12 general election. A majority win for the Tories would give Boris Johnson a better chance of passing his Brexit bill through Parliament. The world is thirsty for an end to the Brexit ordeal and all the uncertainty it has stoked. Some are forecasting a 5% jump in the value of the pound if Mr. Johnson wins the election and comes away with a majority. It also helped sterling that a gauge if U.K. consumer spending topped forecasts, though remained in negativity territory in November.


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