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Currency Market Analysis

Mar 30, 2020 | Currency Market Analysis

Global Themes

Broad gains Monday helped the U.S. dollar bounce back from mid-March lows. The greenback rose against all of its main peers with its biggest gains coming versus emerging markets. The dollar index shed more than 4% last week for its worst week since 2009. The buck has become a barometer of investor angst over the coronavirus. The dollar fell every day last week as investors cheered Wall Street’s best week since the 1930s. But after a weekend of sobering news on the virus, the dollar strengthened anew. Month- and quarter-end rebalancing is also at play. Oil currencies, like the loonie, tumbled as the price of crude seesawed around $20, the lowest level in 18 years. Expect more volatility this week with America’s job market in focus. Nonfarm payrolls for March on Friday are forecast to fall by 100,000, a drop that’s expected to spur a jump in unemployment.


The U.K. pound’s rapid recovery to two-week highs faded as worries about the coronavirus spurred fresh buying of the safer greenback. While the pound has clawed back 10 cents from 35-year lows, it’s still on pace to shed 3% versus its U.S. counterpart in March and double that amount for the first quarter. U.K. data in focus this week include final numbers on fourth quarter GDP (Tuesday), and manufacturing and services activity (Wednesday and Friday respectively) for a dreadful month of March.


The loonie fell from mid-month highs as oil markets started the week with a swoon. The low for oil today slipped below $20, putting prices back around 18-year lows. Markets are on edge once again about the specter of extended uncertainty over all things economics due to the still spreading coronavirus. Canada’s main domestic indicator this week comes Tuesday with a report on monthly growth. Slower January growth is expected after an anemic fourth quarter when it grew at a 0.3% annual rate, the weakest in nearly four years. Lackluster growth would heighten pressure on the Bank of Canada to cut interest rates from 0.75% in potentially short order.


The dollar pivoted higher after more than 4% declines last week proved the most since 2009. Two weeks ago, the dollar index has logged its biggest week of gains (i.e. around 4.3%) since 2008. The dollar’s roller coaster ride is expected to continue for a while yet and largely reflect the prevailing level of investor optimism. Complicating the picture for the dollar is a meaningful look this week at America’s job market which has come under closer scrutiny given that it’s effectively become ground zero for the economic impact from the crisis. Signs of rising unemployment last week unnerved dollar bulls.


The euro slipped from 10-day highs as investor confidence dimmed anew over the coronavirus. The safer buck rose broadly, allowing it to rebound after its worst week in over a decade. Markets are unnerved by the extended uncertainty over the impact the virus on global growth. The euro is also bracing for some potentially sobering stats this week on euro zone inflation (Tuesday) and unemployment (Wednesday). 

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