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Currency Market Analysis

Jun 03, 2020 | Currency Market Analysis

Global Themes

Another wave of selling knocked the U.S. dollar to fresh lows. The buck registered one-month lows against the British pound and mid-March lows against the euro and Canadian dollar. Elsewhere, the Aussie dollar soared to five-month peaks. The market continues to throw both the dollar and caution to the wind, pinning its hopes on a revival of global growth over the coming year. Economic anxiety, while still elevated, has ebbed, boosted by expectations of stronger central bank stimulus to help hasten a global rebound. For now, the market is overlooking potential threats from U.S.-China tensions and American civil unrest. The Bank of Canada today at 10 a.m. ET is expected to keep interest rates at record lows of 0.25%.


The loonie eased off its strongest in nearly three months on caution ahead of a decision by the new look Bank of Canada. Today marks the start of a seven-year term as governor for Tiff Macklem. The bank is generally expected to hold fire on further stimulus under Mr. Macklem’s maiden meeting. The new chief’s assessment of the outlook, if more upbeat than downbeat, would run the risk of adding fuel to USDCAD’s selloff.


The euro’s four-cent rally since early last week hoisted it out of a 2020 hole and to its highest in 2 ½ months. Broad-based dollar shunning, coupled with expectations for the ECB to deliver another bold dose of economy-boosting stimulus, has helped change the course for the single currency. The ECB will announce its policy decision Thursday at 7:45 a.m. ET.


Sterling marched to new one-month highs against the sputtering greenback. The dollar’s marked retreat collided with an ebbing in pound-negative Brexit uncertainty which gave tentative rise to hopes of a compromise deal being reached by year-end. The pound also received some data underpinning as British services growth, while still stuck decidedly in the red, improved more than expected to 29 in May from below 14 in April, suggesting the economic headwinds were losing force. 


The U.S. dollar favored its back foot despite data that suggested America’s labor market might be closer to recovering. Payrolls company ADP said that private employers shed just under 3 million jobs last month, a still massive amount but far fewer than forecasts of a loss of 9 million. The data added traction to the prevailing view that the worst of the economic crisis may be in the rearview mirror. ADP’s better than expected showing offered hope that America’s government jobs report Friday might also surprise to the upside. 

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