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Currency Market Analysis

Apr 17, 2020 | Currency Market Analysis

Global Themes

Stronger risk appetite put a brake on the greenback’s rally. The dollar slipped against its main peers from Europe, Canada and Australia. Oil markets remained under heavy pressure with the price of crude tipping below $18 to fresh 18-year lows. The latest news on the coronavirus crisis was promising on reports of progress toward a vaccine. Markets’ heightened sensitivity to all things coronavirus sent U.S. stocks soaring at the expense of the safe bet greenback. Still, sustaining optimism has been challenging at best which suggests any decline in the dollar may only prove temporary. The dollar was still on track for a weekly gain, albeit a modest one, as data start to trickle in and show a devastating impact on global growth. China reported that its economy contracted by 6.8% in the first quarter which heralds severe economic weakness on a global scale.

GBP

Gains Friday helped the pound move back into positive territory for the week against the U.S. dollar. Britain’s sparse data calendar this week led sterling to take its main cues for the prevailing level of investor tolerance for risk. Wall Street raring to go Friday proved pound-positive as it quenched appetite for safety in the greenback. Britain’s events calendar kicks into high gear next week with numbers on unemployment, inflation and retail sales.

EUR

The euro rebounded Friday but was still on track to finish the week trailing the greenback. The euro found a hand higher from improved risk sentiment with Wall Street signaling a potentially profitable day ahead. Euro sentiment ebbed this week after Europe’s emergency aid package failed to win market approval. Meanwhile, Europe’s economy had a faint and flickering pulse with data confirming that inflation slowed to a danger zone below 1%.

CAD

Canada’s dollar inched higher thanks to the weaker greenback. Gains looked tentative for oil-pegged currencies with crude extending a selloff that pushed prices below $18 to fresh 18-year lows. USD/CAD was more than a penny in the plus column for the week with loonie sentiment dented by the Bank of Canada forecasting severe economic contraction over at least the first half of 2020. Canada next week publishes central bank-impacting numbers on retail sales and inflation on Tuesday and Wednesday respectively.


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