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Currency Market Analysis

May 11, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar kicked off the week with broad gains as cautious investors played it safe. The greenback rose against its big peers from Europe, Japan and Canada. Emerging markets also fell against the dollar. Wall Street rose last week for the first time in three weeks amid cautious optimism about an eventual economic recovery. But sustaining optimism has proven a tough task after last week’s unprecedented U.S. employment report that showed a record loss of more than 20 million jobs in April which pushed unemployment to nearly 15%, the highest since the Great Depression. Expectations that unemployment could top 20% in the months ahead dampened hopes of a strong recovery over the latter half of the year, buoying the greenback. Currencies will take their cues this week from a Wednesday speaking appearance by Fed Chairman Jerome Powell and data on inflation, weekly jobless claims and retail spending. 


A bout of risk aversion caused the recent rally in the Canadian dollar to peter out a bit. The loonie has benefited from oil’s rebound from historic lows with prices today little changed around $24. The loonie strengthened last week despite Canada smashing the record books by shedding nearly 2 million jobs in April which sent unemployment soaring to 13% from 7.8%. Hopes of a Canadian economic rebound taking shape in the months ahead overshadowed the job market’s record weakness.


Sterling fell to the bottom of its range as global stocks slid and uncertainty flared anew over Brexit. As equities decline, investors tend to ditch the pound for safety in the greenback. The U.K. and EU hold another round of Brexit talks early this week. A key summit looms next month when both sides are expected to decide whether sufficient progress toward a trade deal has been achieved. Doubts about a long term trade deal this year would risk prolonging pound-negative Brexit uncertainty.


The euro fell against the dollar which benefited from a risk-off start to the week for global markets with equities and oil in the red. A spotlight on Europe’s floundering economy this week also gnawed at euro sentiment. Friday numbers are forecast to confirm a severe first quarter contraction for both Germany and the wider euro zone economy.

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