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Currency Market Analysis

Mar 27, 2020 | Currency Market Analysis

Global Themes

What a difference a week makes. The greenback was poised to follow up its best week since 2008 with its worst in a decade. The greenback steadied a bit Friday after sinking to 10-day lows against a wide swath of rivals including the euro and Canadian dollar. The greenback was on pace to surrender about 3% of the previous week’s more than 4% appreciation. Demand for the dollar dried up following Wall Street’s banner week and the Fed chief pledging endless amounts of support to an economy that’s come to a screeching halt. Dollar bulls also were spooked by a record rise in weekly unemployment claims. The buck’s setback could give way to renewed buying before long with stocks and investor confidence stuck on a wavering path and after Boris Johnson, Britain’s prime minister, tested positive for the coronavirus.

EUR

A more than three-cent rally this week lifted the euro to 10-day peaks against the greenback. The dollar retreated as investor optimism rebounded thanks to a pledge of limitless support from the Fed and Washington nearing approval of a record aid package in the trillions. The euro capitalized on the greenback’s loss of favor. The euro faces key event risks next week in the form of euro zone inflation and unemployment data on Tuesday and Wednesday, respectively.

CAD

Canada’s dollar slipped Friday but was in position to close out the week with solid, multi-cent gains. The loonie’s nearly 2% jump Wednesday amounted to its best day in four years. Wall Street’s big rally over the previous three sessions quenched demand for the safer greenback. Renewed weakness Friday for stocks and oil put a brake on the loonie’s revival.

GBP

Sterling’s rally of around 4% had GBPUSD on pace for its best week since 2009. Demand for the dollar evaporated as U.S. stocks were poised for their best week since the 1930s, a clear sign of improved investor confidence. The pound also appeared markedly oversold after sinking this month to 35-year lows. Still, coronavirus infection rates continue to climb around the world with Britain’s prime minister, Boris Johnson, testing positive for the menacing disease.

USD

The U.S. dollar rose to session highs after data Friday suggested the world’s biggest economy was in solid shape before the coronavirus grounded it to a halt. Numbers on consumer income and spending rose and the Fed’s main inflation yardstick climbed to within two ticks of its 2% goal. The economy’s overall good shape ahead of the crisis, coupled with Washington set to unleash record stimulus, offered hope that any downward would be less severe and relatively short-lived. Still, the dollar has a heightened sensitivity to jobs data with indicators looming next week on jobless claims and the government’s unemployment report.


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