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Currency Market Analysis

Feb 03, 2020 | Currency Market Analysis

Global Themes

The greenback rose broadly Monday, rebounding from a washy-washy conclusion to January. European currencies buckled with the U.K. pound leading the charge lower. After the U.K. officially exited the EU last week, initial talk from Britian’s prime minister on a trade agreement was less than amicable, keeping alive the risk of a no-deal end to the transition phase at the end of the year. Sterling tumbled more than 1%, losses that bled over to other European currencies. America’s dollar snapped back after enduring renewed weakness late last week from worries about global headwinds further slowing U.S. growth, potentially leading the Fed to lower interest rates. The first week a February is full of top tier data like Friday jobs surveys from the U.S. and Canada.


Sterling tumbled more than 1% as initial trade rhetoric from Britain’s leader struck a less than amicable tone and did little to inspire confidence in the translation phase over the rest of the year ending with a trade agreement. With Brexit uncertainty dominating the spotlight, sterling failed to capitalize on news that Britain’s manufacturing sectored climbed out of contraction territory for the first time since April 2019 in January. While encouraging and supportive of the Bank of England not cutting interest rates last week, the hazy outlook for a Brexit deal is likely to cloud economic prospects for months to come.


Canada’s dollar stabilized above its lowest level in nearly two months, boosted by improved market sentiment and oil rising after an overnight tumble to one-year lows below $51. Concerns about China’s virus moderated but remain at elevated levels and a source of uncertainty for currencies of commodity-influenced economies. Canada’s jobs report Friday, if solid, could offer scope for a loonie rebound. Forecasts point to a second straight month of hiring in January and unemployment holding at a low 5.6%. The jobs report will help sway the local interest rate debate with the likelihood of a cut as soon as April pegged around 60%.


A weaker euro shadowed sterling lower with the single currency down around a third of a percent against the greenback. Sterling’s 1% tumbled spilled over to the euro whose area economic prospects continue to show nascent signs of improvement. Final factory sector PMIs for Germany and the wider euro area enjoyed modest upgrades in January.

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