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Currency Market Analysis

Mar 26, 2020 | Currency Market Analysis

Global Themes

America’s dollar slipped to one-week lows as many braced for data to show the coronavirus making economic landfall. The buck fell to its lowest level in at least a week against the euro, sterling and Canadian dollar. Wall Street signaling a negative start weighed on emerging markets, keeping the Mexican peso close to historic lows. All eyes today are on America’s job market. A report on weekly jobless claims is forecast to show a sharp spike in the number of people seeking unemployment help. Forecasts call for a print of around 1.5 million compared to the previous which had shot to 2 ½ year highs above 280,000. The sheer event risk of the data led some bulls to hop off the dollar’s bandwagon. A weaker than expected number would sound the recession alarms and likely spark a renewed stampede into haven assets, including the greenback.

CAD

A fall in the greenback to one-week lows boosted Canada’s currency to its highest since Mar. 17. Canada’s dollar has found support this week from bold fiscal stimulus initiatives from both sides of the border that could ease the economic hit from the coronavirus. Oil prices weakened anew with crude slipping 3-4% to around $23, a decline the signals continued volatility for Canada’s currency which has shed 5.5% this month and 8.8% this year.

GBP

Sterling rose to one-week highs after U.S. jobs data proved far weaker than expected. A record tally of millions of Americans got in line in the latest period for unemployment help as businesses closed up shop amid the global health crisis. The Bank of England today left its monetary powder dry and its main lending rate at a record low of 0.1%. Ten days on the job, new BOE Gov. Andrew Bailey already has one rate cut under his belt, an emergency move last week. Mr. Bailey and Co. pledged a readiness to lend more monetary support to the U.K. economy whose prospects have significantly darkened as a result of the coronavirus.

EUR

The euro climbed to one-week highs as many loosened ties to the dollar ahead of data forecast to show the initial economic blow of the coronavirus. The euro has shown signs of bottoming after sinking last week to three-year lows. Today’s U.S. data should be telling about recession prospects. Key for the euro, going forward, will be whether European recession risks outweigh the U.S., a scenario that would portend more struggles ahead for the single currency.

USD

The dollar favored one-week lows after a record spike in weekly jobless claims showed the coronavirus making economic landfall as a ferocious storm. Weekly jobless claims soared to a record 3.28 million in the latest period which was more than double forecasts of 1.5 million. The shockingly weak data added conviction to the view of the U.S. economy barreling towards recession. Once the dust settles, the dollar could see a counterintuitive boost as recessionary data is likely to spur a flight to safety in the liquid greenback.


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