Currency Market Analysis

Apr 30, 2020 | Currency Market Analysis

Global Themes

The greenback limped toward the month-end finish line, hitting two-week lows on a trade-weighted basis. The euro was flat while sterling climbed to two-week peaks. A late month resurgence pushed commodity currencies, including the Canadian dollar, to 1 ½ month peaks. The greenback is on track to extend its 2020 winning streak. Yet dollar buying has receded as markets take comfort from global economies taking steps to reopen. A spotlight this week on central banks and their willingness to enhance record amounts of stimulus has also been risk-friendly at the expense of havens like the world’s most liquid currency. Today’s action is likely to be dictated by a post-meeting news conference by the ECB president and U.S. data on America’s hemorrhaging job market.

USD

The U.S. dollar index trimmed losses that pushed it to two-week lows, despite more evidence of the world’s biggest economy staggering toward a deep recession. Personal income and spending were far weaker than expected and down 2% and 7.5%, respectively, in March. Weekly jobless claims remained historically high at 3.8 million in the latest period, a level consistent with double-digit unemployment. Despite central bank vows to step up stimulus, currency volatility has been relatively muted with many nations pursuing rock-bottom interest rates. 

EUR

The euro eased off 10-day peaks in choppy, events-driven trade. The weakest quarterly growth on record didn’t do the single currency any favors. The euro zone economy contracted by a record 3.8% in the first quarter, eclipsing forecasts of a 3.5% plunge. Other stats were mixed but likely understate economic weakness with unemployment and inflation not as bad as expected. The ECB today kept borrowing rates unchanged but unveiled a new program to provide cheap long-term loans to banks to help jumpstart borrowing and spending to boost the wider economy.

GBP

Pound strength Thursday had the U.K. currency on track for its first monthly win of the year. Pound buoyancy, while modest, is more a function of improved global risk appetite than a brightening in area fundamentals. Capping sterling gains is the view that the U.K. is likely to be among the last European nations to roll back lockdown measures which, while positive for battling the health crisis, puts its economy at a comparative disadvantage. 

CAD

Canada’s dollar pared gains after the nation’s economy proved weaker than expected ahead of the coronavirus. Canada’s economy stalled with a flat reading in February, wrong-footing forecasts of a modest increase. Some of the sting from the data was eased by the fact that January growth got revised a tick higher to 0.2%. The loonie was on track for a monthly gain of more than 1%, helped by higher oil in recent days and improved risk sentiment that dampened demand for the safer greenback.


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