Currency Market Analysis

Apr 23, 2020 | Currency Market Analysis

Global Themes

Data from Europe sounded the recessionary alarms, sending the euro to one-month lows. But the euro’s loss wasn’t quite the U.S. dollar’s gain as oil strengthened to the mid-teens with others treading cautiously ahead fresh news on America’s sputtering job market. The yen and sterling benefited from the euro’s data-induced tumble. Oil’s rise to $16 buoyed the commodity trio from Canada, Australia and New Zealand. The euro slipped after a gauge of PMI activity across the euro zone contracted at a record rate of 13.5 in April – far below the key 50 level that separates growth from contraction. The grim data heightened the stakes for European officials today to agree on more economy-boosting stimulus. 

EUR

The euro sank to one-month lows after dreadful data was consistent with the bloc in an unprecedented recession. The euro zone’s composite PMI crashed to historic lows of 13.5 in April from an already bad 29.7 in March. The scale of the collapse suggested the euro zone could be contracting at a quarterly rate of around 7.5%. It was also consistent with area unemployment doubling from an already elevated level above 7%. At session lows, the euro was down more than 0.5%, putting it in closer reach of recent three-year lows. 

USD

The U.S. dollar index held firm after the latest jobless claims largely met expectations. Just over 4.4 million people sought unemployment aid in the latest period which, while historical high, has trended downward since peaking near 7 million weeks ago. The buck remains well-supported by the specter of the global economy plunging toward an unprecedented downturn. 

GBP

Sterling rose against the weaker euro but was little changed versus the greenback following a spate of negative news on the world economy. U.K. data added to the malaise with a measure of both manufacturing and services growth faring even worse than the euro zone. Britain’s composite PMI plunged to 12.9 in April, a reading that points to the U.K. economy contracting at the fastest rate in decades. Oil and stocks for now holding their chins higher translated into support for the pound.

CAD

Oil’s bounce to $16 from $13 buoyed the commodity bloc of currencies. But the still volatile state of oil markets leaves commodity currencies on shaky ground. Broader markets received a confidence boost from hopes of stronger stimulus for the world’s biggest economies. Oil has found a momentary floor in expectations that OPEC could further curb production to help shore up prices that fell below zero this week. 


Get the daily currency market analysis in your Inbox

Published five days a week, this newsletter provides day-to-day trends and activities affecting the market in easy-to-understand snapshots.