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Currency Market Analysis

Apr 14, 2020 | Currency Market Analysis

Global Themes

The greenback softened to multiweek lows on signs the coronavirus was loosening its strangle hold on the planet. The euro and yen flirted with two-week peaks while rivals from Britain, Canada and Australia were at or near one-month highs. Emerging markets moderated, a sign of still skittish investor confidence. Overnight numbers from China, while negative, proved better than expected, suggesting that recovery from the pandemic was underway. The Trump administration, meanwhile, reportedly plans to soon announce a team to study when the world’s biggest economy should reopen. The latest developments from the world’s top two economies were enough for many to scoop up some of the hardest hit currencies in the wake of the coronavirus pandemic. Sustaining markets’ improved mood may prove challenging ahead of U.S. data this week on retail sales and weekly jobless claims.

GBP

Sterling notched one-month highs as risk appetite improved, quenching for now investor appetite for safety in the U.S. dollar. A dearth of U.K. data this week has led the pound to take its cues from global developments. A subsiding of U.K. political risk with Boris Johnson out of the hospital and on the mend translated into added traction for the pound’s recovery from recent 35-year lows.

CAD

Canada’s dollar strengthened to nearly one-month highs as greenback weakness overshadowed chronic oil market weakness. A 5% decline pushed oil prices under $22. The loonie is likely to stick to the range ahead of a midweek policy decision by the Bank of Canada. Central bankers’ assessment of an economy that shed more than a million jobs last month is likely to prove critically important for loonie sentiment. USDCAD is up 7% this year, boosted by Canada’s aggressive interest rate cuts and oil’s sharp swoon from above $60 at the end of 2019.

EUR

The euro flirted with two-week highs against the U.S. dollar as improved risk tolerance squeezed the safer greenback. Still, Europe’s single currency kept to a narrow range with upside checked by the bloc’s decidedly weak fundamentals. Data Friday is forecast to confirm that euro zone March inflation returned to a danger zone below 1%, a wrong turn from the ECB’s goal of near 2%.


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