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Currency Market Analysis

May 26, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar emerged groggy after the holiday weekend with across the board declines. Optimism is in the air as economies reopen and companies make progress toward a coronavirus vaccine. The resulting improvement in risk appetite weighed on the safer greenback which slipped broadly, hitting two-week lows against sterling and its weakest in more than two months versus the Canadian dollar. Optimism for now is outweighing potential threats from elevated U.S.-China tensions, worries that are limiting gains for risk assts and tempering bouts of dollar weakness. Ahead in the holiday-shortened week are reports on U.S. consumer confidence today and Friday when Canada issues first quarter growth.


Canada’s dollar rolled to 10-week highs amid an uptick in both oil markets and investor confidence. Oil topped $34, the upper end of its range and the highest in more than two months. Canada’s main economic sights are set to Friday when the country publishes first quarter GDP which is forecast to contract by a substantial 10% compared to already tepid fourth quarter growth of 0.3%.  


The euro outperformed its weaker U.S. counterpart. While stronger, the euro continued to struggle to break above key technical resistance that’s been in place for weeks. The key number to watch from Europe this week is preliminary inflation data Friday that’s forecast to fall deeper into a danger zone below 1%.


Sterling climbed to two-week peaks thanks to improved risk taking and broad based greenback weakness. A light week of U.K. data means the pound will likely be at the mercy of broader risk sentiment. The pound was little swayed by a survey of U.K. consumer spending which inched above the weakest level since the 2008 financial crisis.

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