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Currency Market Analysis

Mar 17, 2020 | Currency Market Analysis

Global Themes

Haven seekers dove head-first into the greenback as global growth fears flared. The dollar shot higher against the euro, yen and sterling, and jumped to fresh multiyear peaks against rivals from Canada, Australia and New Zealand. Broader market vital signs showed improvement following the Dow’s historic slide of nearly 3,000 points, or almost 13%, on Monday. Wall Street futures, oil and Treasury yields all pointed higher. The dollar is benefiting as the coronavirus shows evidence of damaging economies across the Atlantic. German investor confidence plunged anew in March while unemployment in Britain unexpectedly ticked higher. While the Fed’s colossal 150 basis points of interest rate cuts this month have been a tough pill for the dollar to swallow, the greenback is finding support from the central bank’s proactivity that should help America’s economy better weather the hit from the coronavirus.


Losses for the Canadian dollar accelerated after it broke through a key psychological level. Canada’s buck stumbled to fresh four-year lows as weak stock and oil markets darken the economic outlook. The Bank of Canada likely needs to slash borrowing rates from their current level of 0.75%. The BOC already this month has delivered two sizable cuts of 50 basis points. Softer Canadian inflation Wednesday would be supportive of an imminent reduction in lending rates, a loonie-negative scenario.


The dollar shot toward recent highs for the year as risk-averse players sought its safety and liquidity during turbulent times. Sentiment remains fluid though which points to more erratic swings ahead. The dollar’s safety standing overshadowed disappointing data on America’s economy-driving consumer. Retail sales unexpectedly tumbled and by 0.5% in February which all but erased an upwardly revised increase of 0.6% in January. The pullback in spending may have legs in the weeks and months ahead as the coronavirus brings activity to a near standstill.


Sterling tumbled more than 1% to its weakest in six months against the dollar. The pound is getting ditched in favor of safe bets like the greenback as the coronavirus shows signs of squeezing Britain’s economy. The latest U.K. jobs data flashed mixed signals as hiring rose, unemployment increased and wages moderated. The data, on balance, bolstered expectations that Britain’s central bank could unveil more stimulus measures, such as QE, when it meets on March 26.


The euro tripped and fell below a key psychological level against the greenback as data aggravated fears about Germany descending into recession. Germany’s influential ZEW index of investor confidence plunged nearly 50 points below zero, an amount nearly two times weaker than expected. The data fanned fears of Europe’s biggest economy spending the first half of 2020 in recession.

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