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Currency Market Analysis

Apr 07, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar slipped from elevated terrain on signs that measures to slow the spread of the coronavirus are beginning to bear fruit. The buck was at or near one-week lows against the euro and Canadian dollar and flirted with a two-week bottom against the politically-vulnerable U.K. pound. The Aussie and kiwi dollars also strengthened, along with emerging markets. Markets are cheering reports of progress in slowing the spread of the coronavirus in New York City and parts of Europe. While the situation remains fluid, signs of progress were enough to coax many to loosen ties to the world’s most liquid currency: the greenback. While stronger, sterling could be subject to higher volatility after the health of the nation’s leader, Boris Johnson, worsened due to the coronavirus, landing him in the ICU.

GBP

Sterling rose against the weaker dollar but bubbling near the surface was political instability with the nation’s prime minister battling to recover from the coronavirus in the ICU. If Boris Johnson’s condition continues to worsen, it could trigger a constitutional dilemma since Britain doesn’t formally have a No. 2 leader, like vice president in America, who could step in should the prime minister need to be replaced. For now, Britain’s foreign secretary, Dominic Raab, is filling in for Mr. Johnson. The pound traded within a somewhat wider two-cent range overnight. 

CAD

The loonie shot to 11-day highs, boosted by improved risk tolerance, stronger oil markets and a weaker greenback. The price of crude rose more than 1% to further above $26. Global stocks were in rally mode for a second straight day on nascent signs of progress in containing the coronavirus pandemic. But lurking near the surface for Canada were influential indicators like the Ivey PMI later today that’s forecast to contract and Friday jobs data that’s expected to show the nation shed around 350K workers last month. Unemployment is forecast to top 7% from below 6%.

EUR

The euro jumped to positive territory for the week as rallying global stocks quenched appetite for safety in the greenback. The Dow was poised to build on the previous day’s strong rally of some 7.7%. Meanwhile, a surprise rise in German factory growth in February helped the euro pad its gains. Italy reporting a slowing in the number of new infection rates points to the mitigation efforts bearing fruit, another euro-supportive factor.


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