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Currency Market Analysis

Apr 16, 2020 | Currency Market Analysis

Global Themes

A midweek bounce drove the U.S. dollar to one-week highs where it remained ahead of a crucial look at the faltering health of America’s job market. The mostly stronger greenback rose to one-week highs against the euro and held firm against the yen and sterling. Steadier oil markets buoyed the Canadian dollar and its commodity cousin from Australia. Emerging markets were mixed. The dollar returned to the win column Wednesday as record weak U.S. indicators dumped cold water over hopes of a V-shaped economic recovery from the coronavirus. Retail sales logged a record drop of more than 8% in March. Moreover, the IMF forecast the global economy was headed for its worst year since the Great Depression. Weekly jobless claims today are forecast to top 5 million in the latest period, a print that would be consistent with the U.S. economy taking a sudden slide into recession.


Canada’s dollar firmed against the otherwise stronger greenback. Oil showing tentative poise after sinking to fresh 18-year lows below $20 buoyed most commodity currencies. Still, the loonie’s vital signs are seen at risk of weakening after the Bank of Canada forecast severe economic contraction over the first half of 2020. Canada’s central bank served notice to markets that second quarter growth could contract by 15% to 30% due to virus-related disruptions. 


The euro fell to one-week lows amid sobering prospects for domestic and global growth. Hopes of a relatively quick economic bounce back from the coronavirus were dealt a setback from a dire growth forecast from the IMF. Adding to the global malaise, U.S. retail sales logged the biggest plunge on record in March. Meanwhile, the perception that Europe’s half a trillion emergency aid package was inadequate to meaningful protect the bloc’s economy from coronavirus shocks also weighed on the single currency.


Sterling remained subdued and more than a penny below one-month peaks. The sense that the economic recovery from the coronavirus could come in more fits than starts has weighed on most major currencies to the benefit of the greenback. Scope for sterling weakness likely hinges on how Wall Street fares. Early indications pointed to a better day for U.S. equities after Wednesday’s sell down. 


The U.S. dollar held firm after weekly jobless claims printed close to expectations. The latest number topped 5.2 million, a historically high level that’s consistent with record unemployment above 10%. The dollar has fared better this week as record weak data suggested a longer and more uncertain road to recovery, a dimmer outlook that’s revived appetite for haven assets. 

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