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Currency Market Analysis

Jan 10, 2020 | Currency Market Analysis

Global Themes

Ahead of key U.S. jobs data, the greenback was mostly firmer and on track for its best weekly performance in months. The dollar was at or near two-week peaks against the euro, yen and Canadian dollar. Sterling was flat while improved risk tolerance supported the Aussie and kiwi dollars. The U.S. unit clawed back ground against haven rivals like the yen and Swiss franc amid a marked reduction in tensions between the U.S. and Iran. Meanwhile, fresh evidence of a resilient U.S. economy also buoyed the greenback. If today’s December jobs report shows similar strength as numbers this week on the trade balance and service sector growth, the dollar would be well placed to add to its recent advance. Forecasts call for unemployment to hold around 3.5% last month, the lowest in 50 years.


Ahead of America’s jobs report, the pound was on pace for a weekly decline. Sterling sagged after cautious remarks from the head of the Bank of England opened the door wider to a rate cut to goose Britain’s slow growing economy. By contrast, the Fed’s mini rate cutting cycle may be over if coming data depict an economy firing on most cylinders. The spotlight next week will shine on U.K. inflation and retail sales, recent softs spots in the world’s No. 5 economy.  


Canada’s dollar struck a defensive pose ahead of U.S. and Canadian jobs data this morning. Hiring is expected to rebound in Canada in December after a shock loss of more than 70,000 jobs the previous month. The loonie could head toward recent 14-month peaks if the jobs report should meet or beat forecasts which would reassure central bankers and keep a high bar in place for a rate cut from 1.75%.


The euro shifted from multimonth highs to multiweek lows as Middle East tensions cooled and America’s economy showed underlying strength. Europe’s economy, meanwhile, remained in a fragile place. Germany factory data were mixed while unemployment across the 19-country euro zone steadied at 7.5%, the lowest in more than 10 years but a still undesirably high level.

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