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Currency Market Analysis

Nov 26, 2019 | Currency Market Analysis

Global Themes

The U.S. dollar drifted aimlessly in pre-holiday trading. The buck kept towards the top of its recent ranges and near multiweek peaks. The greenback overnight notched two-week highs against the yen while it held within reach of six-week peaks against Canada. European currencies were mixed with the euro steady and sterling weaker. Already tepid market volatility has dried up further ahead of Thursday’s Thanksgiving holiday, keeping currencies confined to narrow ranges. Signs of a sturdy U.S. economic backbone continue to underpin the greenback. Resilient consumer spending, the main driver of U.S. growth, has raised the bar to further rate cuts by the Fed. Forecasts call for improvement for numbers today on U.S. consumer confidence and new home sales.


The loonie marked time ahead of Friday, when Canada issues its third quarter economic report card. Forecasts call for growth during the summer quarter to slow to a 1.2% annual rate from nearly 4% in the spring. The data will serve as one of the last major looks at the economy before the Bank of Canada issues its final policy decision of the year on Dec. 4. While the BOC may keep its powder dry next week, slower growth could bring Canada’s central bank a step closer to a rate cut in the months ahead.


Once a Brexit barometer, sterling is now taking its main cues from opinion polls ahead of Britain’s general election next month. A poll this week showed a narrowing in Conservatives’ lead over their main challenger, Labour. The latest polling data still suggests a solid, double-digit lead for Boris Johnson’s ruling party, suggesting limited downside for the pound. A majority win for the Conservatives could potentially be the pound’s ticket significantly higher as it would bolster prospects of an orderly Brexit in the months ahead.


The yen fell to two-week lows on tentative hopes of progress between the U.S. and China over trade. Still, upside for the U.S. unit was capped by Treasury yields keeping well below recent peaks which limit the dollar’s appeal.


The euro’s ability so far to hold above a key floor helped it steady in pre-holiday trading. The euro may need a fresh catalyst to drive it meaningfully lower. Big numbers from the euro zone loom Friday. Inflation is forecast to edge up but remain in a danger zone below 1%, and far below the ECB’s near 2% goal. Unemployment is expected to steady at 7.5%, the lowest in more than a decade but more than double America’s 3.6% rate.

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