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Currency Market Analysis

Jun 08, 2020 | Currency Market Analysis

Global Themes

America’s dollar was largely flat after catching a jobs boost Friday. The greenback was little changed against the euro and sterling but slipped versus the yen and commodity rivals. A firmer Canadian dollar notched fresh three-month peaks while the Aussie dollar flirted with highs for the year, a remarkable turnaround from mid-March when it slumped to 18-year lows. The greenback found a tentative floor in record U.S. job growth last month when the world’s biggest economy unexpectedly added 2.5 million jobs. The hiring spree kept alive hopes of a V-shaped recovery. Still, the road to full recovery is likely to prove long and winding, keeping caution high. This week’s marquee event will be a two-day policy meeting by the Federal Reserve that concludes Wednesday with a statement and a news conference by Chairman Powell. The dollar would be at risk of slipping anew if the Fed vows a readiness to deliver more economic support.

CAD

Canada’s dollar rose to three-month highs as commodity currencies continued a recent stretch of outperformance. The loonie might be even stronger if not for oil slumping after touching three-month peaks above $40 and after big oil producers agreed to extend production cuts through July. Optimism that at least a gradual recovery has commenced for global growth has materially brightened the prospects of growth-reliant commodity currencies with the Aussie dollar not far from 2020 highs.

GBP

Sterling held firm around mid-March highs but continued to waver around a key technical level, its 200-day moving average. Solid appetite for risk, with Wall Street poised to extend recent gains, translated into support for the U.K. unit. While the pound has outperformed of late, downside risks remain such as persistent uncertainty over Brexit negotiations. 

EUR

The euro’s surge to three-month highs moderated following transatlantic data that diverged in America’s favor. After data showed record hiring in the U.S., the news from Europe Monday was less encouraging as German industrial output plunged at a record rate of nearly 18% in April. The euro appears to be consolidating a rally that’s pushed it higher for three consecutive weeks. If the euro can hold above key support, it would keep alive a rally that could potentially take renewed aim at highs for the year.


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