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Currency Market Analysis

Mar 13, 2020 | Currency Market Analysis

Global Themes

America’s revived greenback remained in positive territory after storming back from year-plus lows. The U.S. dollar rose Friday against the euro, yen and sterling but slipped against some of its hardest hit rivals like the Canadian dollar and Mexican peso. When market worry reaches a fever pitch, investors reach for the dollar. Wall Street futures pointed higher after its worst selloff since the 1987 Black Monday swoon. Still, the market bias remains negative on the perception that policymakers haven’t done enough to stem the fallout from the coronavirus pandemic. The buck’s late week surge erased an early week hole when it had plunged to its weakest in more than one and three years against the euro and yen respectively. Volatility is expected to remain acute until policymakers say or do something to instill some semblance of investor confidence or the number of viral infections show signs of receding.

EUR

The euro slipped to more than one-week lows after the ECB’s latest effort to shore up the bloc’s embattled economy received a lackluster reception. Admittedly, the ECB had little leeway to cut interest rates from already negative levels. The central bank’s inaction on rates disappointed the market and signaled a toolbox that was all but depleted.

CAD

Canada’s dollar caught a respite after sliding to successive four-year lows. A 5% bounce in oil markets to above $33 put some wind in the loonie’s sails. Markets also cheered steps by China to ease monetary policy to help the world’s second-largest economy recover after the coronavirus effectively ground it to a halt. Canada next week issues key numbers on inflation Wednesday and retail sales Friday.

GBP

Sterling languished around five-month lows following its worst day since July 2016 when it shed 2 ½ cents against the greenback. The pound’s nearly 4% losses over the week had it on pace for its worst performance since October 2016. Sterling fell prey to the greenback’s coronavirus-inspired revival which overshadowed Britain’s popular one-two punch of monetary and fiscal stimulus aimed at bolstering the world’s No. 5 economy from fallout from the coronavirus pandemic.


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