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Currency Market Analysis

Apr 27, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar kicked off a big week with declines amid a cautious air of optimism. The dollar slid against most peers like the euro, sterling and Canadian dollar. Emerging markets also enjoyed some buoyancy against the greenback. Risk assets like stocks are bouncing to begin the week thanks to easing lockdown restrictions around parts the world. Markets are also taking some solace ahead of central bank decisions this week which are likely to signal a readied stance to do more to ease the economic carnage from the coronavirus. Still, optimism was in limited supply, particularly with oil markets tumbling anew and down more than 20% to $13. The coming week will shed more light on the extent to which the pandemic has damaged global growth with top tier growth figures from the U.S., Europe and Canada.

CAD

Canada’s loonie strengthened as greenback weakness overshadowed more losses for oil markets. U.S. crude sank more than 20% which pushed prices below $13. Canada’s main economic event arrives with a Thursday reading of February growth. The data could prove the final month of Canadian growth until later this year in the wake of the coronavirus which has the Bank of Canada bracing for a severe contraction. The loonie could lose luster if the data should disappoint forecasts of a 0.1% rise which would depict the economy on shakier ground before the viral outbreak.

EUR

The euro pushed above one-month lows hit Friday as a risk-friendly start to the week weighed on the haven dollar. The coming week will be a big one for the single currency with the ECB issuing a policy decision Thursday, the same day the euro zone publishes fresh stats on first quarter growth, inflation and unemployment. Bearish data and a dovish ECB would be a recipe for a weaker euro. 

GBP

Sterling rose to one-week highs against the weaker U.S. dollar. The pound also received a tailwind from Boris Johnson, Britain’s prime minister, returning to work after battling the coronavirus, a development that had saddled the U.K. currency with a degree to political uncertainty. A light week of U.K. data could see the pound take its main cues from wider risk sentiment which could be in for a fitful week with central banks and big ticket data from around the world in focus. 


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