Currency Market Analysis

Apr 21, 2020 | Currency Market Analysis

Global Themes

Oil trading south of zero kept risk aversion high and investors clutching greenbacks. Though down against the yen, the dollar scaled two-week peaks against the euro and sterling, and was at or near three-week highs against oil-correlated currencies from Canada and Norway. Markets are rattled anew by bearish oil dynamics where supply outstrips demand and storage space, and fears that troubles plaguing energy may herald wider global market weakness. Reports that North Korea’s leader may be in ‘grave’ condition added an ingredient of geopolitical uncertainty to markets’ risk-off stew. Global data was mixed as German investor optimism unexpectedly brightened but U.K. unemployment rose ahead of the onset of the coronavirus. WTI crude traded at minus $5 after closing at -$37 on Monday, its first foray ever into negative territory.

EUR

In a telltale sign of euro negativity, Europe’s single currency failed to get a rise out of heartening news on the mood of the German investor. The ZEW index unexpectedly brightened to a reading of positive 28.2 in April from nearly minus 50 in March. Doubts about the sustainability of the improvement in the face of heightened global uncertainty led the euro to shrug off the upbeat news.

GBP

Sterling fell against its safer U.S. rival which benefited from elevated risk aversion. The pound is also likely being liquidated following its torrid rebound from 35-year lows last month to cover oil market related losses. Meanwhile, the fact that British unemployment had ticked higher to 4% before the arrival of the coronavirus pandemic which has wreaked havoc for many, including Britian’s prime minister, added to the bearish outlook for Britain’s economy, pressuring the pound.

CAD

Canada’s loonie neared a three-week bottom as a measure of oil tipped to historic lows below zero. So far the loonie’s losses have proven garden variety as oil futures from June forward are in the black and above zero. Still, oil markets have been under heavy pressure and could crater further, a situation that could leave the loonie at risk of deeper losses. Canadian retail sales topped forecasts with a 0.3% rise in February which was half the pace of January’s upgraded increase of 0.6%.


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