Currency Market Analysis

Apr 08, 2020 | Currency Market Analysis

Global Themes

Buck oscillates with risk sentiment

America’s dollar edged up, along with market trepidation over the coronavirus crisis. The buck was mostly firmer thanks to gains against the euro and yen. Sterling and Canada’s dollar were little changed. The dollar climbed out of its biggest hole in about a week as risk sentiment wavered. The value of the dollar is serving as a barometer of market angst over the coronavirus pandemic damaging global growth. The buck tends to weaken on signs that the spread of the disease may be slowing. On the other hand, the dollar often outperforms on the sense that it will be a while yet before the pandemic meaningfully abates. Markets are also bracing for more grim news from America’s job market tomorrow which will effectively be the final day of the week for global markets that will be closed for the Good Friday holiday.

CAD

Canada’s dollar squandered an 11-day high but remained in positive territory for the week. Wavering risk sentiment weighed on the loonie, along with caution on the eve of a critical report on the state of the nation’s job market. Forecasts call for a massive loss of 350,000 jobs in March which is seen pushing up unemployment to 7.2% from 5.6%. Canadian employment data can vary wildly given the limited indicators available on the labor market. A weaker than expected print would offer evidence of the coronavirus taking a bigger than expected toll on growth, a scenario that could potentially propel USDCAD higher.

EUR

The euro pared a weekly gain on disappointment over Europe struggling to agree to an emergency aid package to dampen the economic blow from the coronavirus. European finance ministers are expected to resume talks on an aid package Thursday. The sticking point for nations like Italy and the Netherlands is over the conditionality of the emergency lending measures. Failure to reach a deal this week could catalyze a bout of euro selling ahead of the long holiday weekend.

GBP

Sterling steadied as it largely held a vigil for updates on the condition of British Prime Minister Boris Johnson. Mr. Johnson has been in the hospital since Sunday and in the ICU since Monday when his coronavirus symptoms took a turn for the worse. The latest reports indicated that the prime minister was in stable condition. The pound could be saddled with political upheaval if Mr. Johnson’s condition should further worsen, given the lack of constitutional roadmap for a successor should he need to be replaced.


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