Currency Market Analysis

Jun 12, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar was little changed though risk appetite improved after a sharp slide the day before. Consequently, the dollar drifted against its chief rivals from Europe and Canada. Wall Street pointed to gains after the Dow tumbled nearly 7% Thursday when investors dialed down their enthusiasm for a somewhat rapid rebound in global growth. The dollar has found a modicum of support that’s lifted it slightly above three-month lows. While the dollar’s downward trajectory appears intact, it stands to benefit from the highly uncertain road ahead for U.S. and global growth. The coming week will be a busy one as the Fed chair delivers economic testimony on Capitol Hill and the U.S. issues crucial data on retail sales. The Bank of England headlines a big data week for Britain, with Canada set to publish numbers on the all-important consumer.

GBP

Hopes that Britain’s record bad economic performance in April marked the bottom helped sterling sidestep the weaker than expected print. The world’s fifth biggest economy contracted 20.4% in April from an already significant tumble of nearly 6% in March. With shops slowly reopening, the expectation is that growth has already started to rebound. The Bank of England will headline a risk event-laden week for Britain. Data on unemployment and inflation are due Tuesday and Wednesday, followed by the central bank Thursday and retail sales Friday. The events may shed light on the likelihood of the BOE deploying pound-impacting negative interest rates.

EUR

The euro rebounded after a Thursday fall when global players took profit on a wide range of risk assets. The material brightening in sentiment makes the euro a buy on the dips. The euro will look for its next cue from a report on German investor confidence on Jun 16. Improvement is on the cards for the key ZEW survey which, if realized, would be supportive of sustained gains for the single currency.

CAD

The loonie rebounded from a brush with two-week lows but losses from the previous day had it on track for a week of underperformance. The loonie lost the handle on three-month highs after markets reined in enthusiasm about a global recovery taking flight. The forced gut check came from the Fed’s decidedly cautious outlook that it said warranted rock-bottom interest rates for years to come. Canada’s currency will look to domestic reports next week on consumer inflation (Wednesday) and consumer spending (Friday) which will help steer expectations for central bank policy.


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