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Currency Market Analysis

Jun 02, 2020 | Currency Market Analysis

Global Themes

U.S. dollar misfiring on more cylinders


Another day, a weaker U.S. dollar. The greenback was around a third of a percent weaker Tuesday as it slid to one-, two- and three-month lows against rivals from Britain, the euro zone and Canada. The greenback also weakened to fresh multimonth lows versus the Aussie and kiwi dollars and emerging markets like counterparts from Mexico and South Africa. With recovery optimism on the rise, it’s lessened demand for the greenback as a safe harbor. Much of the dollar’s outperformance this year has stemmed from safe haven demand from the economic wallop of the coronavirus. Recent data, meanwhile, has been supportive of the view of global growth bouncing back as soon as June, putting another headwind on the dollar.

EUR

The euro notched a fresh 2 ½ month high against the struggling greenback. Expectations of more stimulus from Europe have sketched a picture of brighter economic potential across the continent, buoying the euro. The ECB issues a policy decision Thursday when central bank watchers expect it to increase its €750 billion Pandemic Emergency Purchase Program to around €1.25 trillion. The ECB will issue its policy decision June 4 at 7:45 a.m. ET. Stronger stimulus could potential keep the euro biased higher.

GBP

Sterling clawed to one-month highs as the greenback descended into a deeper second quarter hole. The spotlight is shining brighter on Brexit with hopes flickering for some progress in the latest round of negotiations. The pound is also basking in nascent optimism that global growth appears on a path to recovery over coming months.

CAD

Canada’s dollar flirted with three-month peaks, boosted by the U.S. currency’s continued loss of altitude and oil markets extending a recovery. The price of crude topped $36 for the first time since March. Meanwhile, Canadian growth fears have shown nascent signs of moderating ahead of a Bank of Canada decision Wednesday and the country’s May jobs report Friday. Stephen Poloz steps down today as BOC governor and will be succeeded tomorrow by Tiff Macklem, who could immediate put his stamp on the bank with more stimulus.


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