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Currency Market Analysis

Apr 01, 2020 | Currency Market Analysis

Global Themes

Dollar springs into Q2

Unease about what lies ahead in the coming spring quarter helped the safer greenback get off to a strong start. The dollar rose against its main peers as risk aversion gripped global markets. The dollar posted small and medium size gains against the yen and sterling, and bigger ones near to above 1% against the euro, Canadian dollar and Mexican peso. The China-sensitive Aussie and kiwi dollars also slumped. Market confidence dipped anew after President Trump warned of “rough” weeks to come in the battle to contain the coronavirus. Meanwhile, data from Japan and Europe proved the weakest in years, prints consistent with a severe loss of global economic momentum. America’s ADP jobs report of private sector hiring beat forecasts but still showed the first loss of jobs in years.


The dollar squandered a gain against the yen after U.S. jobs data added to concerns about rising unemployment due to business closures related to the coronavirus. ADP reported a loss of 27,000 private sector jobs in March, the survey’s first contraction in years. While the data wasn’t as bad as forecasts of a loss of 150,000 jobs last month, it offered nothing to cheer about since the survey only captured employment activity through about mid-March. Coming jobs data are expected to sound the recessionary alarms, potentially hurling unemployment toward or above 10%.


The U.K. pound descended against the stronger greenback, weighed down by data showing Britain’s factory sector logged its weakest performance since July 2012 in March. Dollars outperformance also stems from downbeat investor confidence ahead of what’s likely to prove a punishing quarter for global growth. Sterling clawed back a dime in value from 35-year lows but still ended March with a 3% decline against its U.S. rival.


The euro shadowed global equities lower as risk aversion weighed to the benefit of safer bets like the greenback. The euro’s lackluster debut to April also stemmed from revised data that showed a faster rate of manufacturing contraction for Germany, the bloc’s top economy, and the wider euro zone. EURUSD largely broke even in March but has fallen around 2.5% so far this year.


Canadian dollar losses dribbled into April with the loonie down more than 1% Wednesday. USDCAD jumped nearly 5% in March which proved to be its strongest month in five years. The commodity-linked loonie didn’t stand much of a chance last month after the price of oil collapsed by more than 50% to end the month just above $20. Next on the loonie’s directional radar: U.S. jobs data Friday and Canada employment Apr. 10.

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