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Currency Market Analysis

Apr 28, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar slipped into a bigger hole as concerns over the coronavirus abated. An across the board decline pushed the greenback to one-week lows against the euro and to a two- and six-week bottom against Canada and Japan. Sterling also strengthened while the Aussie dollar notched seven-week peaks. Confidence is slowly returning to markets as some economies loosen economy-crippling lockdown measures, a clear sign of moderating concerns about the pandemic. As confidence improves demand for safety in the U.S. currency diminishes. Risk assets are also in favor ahead of central bank decisions tomorrow and Thursday in the U.S. and Europe, respectively. But sharing the stage with the world’s biggest central banks are big ticket data that could prove epically bad and potentially risk a fresh round of U.S. dollar buying.

GBP

The U.K. pound flirted with two-week peaks, boosted by improved risk sentiment and outperforming global equities. As global confidence improves, demand for the safe haven greenback tends to diminish. Sterling was one of the hardest hit major currencies when global markets cratered last month when the pound collapsed to 35-year lows against the greenback. Up about 0.5% in April, GBPUSD is on pace for its first winning month of the year. 

EUR

The euro climbed along with risk appetite. The euro notched one-week peaks against the greenback with confidence on the rise ahead of policy decisions this week from the world’s two biggest central banks: The Fed and ECB. At the very least, central bankers are likely to signal a readied stance to lend more support to growth that’s been decimated by economic closures aimed at strangling the coronavirus. While downward pressure has eased on the single currency, area data this week that should prove weaker than expected could leave Europe’s common currency vulnerable. 

CAD

The loonie outpaced both the greenback and sliding oil markets. USDCAD recoiled to two-week lows as improved global confidence crimped demand for safety in the U.S. unit. While firmer, underlying loonie sentiment appeared fragile given chronic weakness in energy markets. Oil weakness represents a persistent headwind on Canada’s commodity-influenced economy. Canada’s economic fitness ahead of the coronavirus will be evident in February growth data Thursday. A print around or better than forecasts of 0.1% would help the loonie cement its first winning month of the year. USDCAD is down nearly 1% this month.


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