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Currency Market Analysis

Jun 15, 2020 | Currency Market Analysis

Global Themes

Caution reigned and the U.S. dollar steadied amid renewed concerns about the coronavirus. The greenback was flat against the euro, yen and sterling but rose to two-week peaks against the Canadian and Australian dollars. Reports of rising coronavirus cases in the world’s biggest economies are unsettling markets and spurring fresh demand for haven currencies. Renewed concerns about the coroanvirus are also dampening optimism about the global economy making a booming comeback. More choppy, seesaw trade appears in the cards this week as traders look to economic indicators and speaking appearances every day this week by top Federal Reserve officials, including Chairman Jerome Powell. Key numbers to watch this week include U.S. retail sales Tuesday and weekly jobless claims Thursday.

EUR

A revival in risk aversion and concerns about the coronavirus weighed anew on the single currency, which has fallen about two cents from three-month peaks. A key number to watch for Europe this week is Germany’s ZEW gauge of investor confidence on Tuesday. Forecasts call for improvement which if realized may cast the bloc in a better light and potentially result in renewed upward traction for the euro. 

CAD

Canada’s loonie fell to two-week lows and moved more than three cents below recent three-month peaks. Risk aversion is on the rise, buoying the haven greenback, as a rise in coronavirus cases undermines recovery hopes over the balance of the year. The more sobering assessment of the economic outlook suggests that central banks, like Canada’s, may need to further strengthen stimulus. Look for the Bank of Canada policy debate to be stirred this week by May consumer inflation Wednesday, and April retail sales Friday which are forecast to be worse than March’s record 10% plunge.

GBP

The U.K. pound steadied after an overnight fall to two-week lows. Sterling has come under renewed pressure as sinking global stocks whet appetite for safer bets like the greenback. Pound bulls are also taking a breather ahead of critical British data this week that, if markedly weaker, could strengthen the argument for the Bank of England to push interest rates below zero. The BOE issues a policy decision Thursday when it is expected to maintain record low rates of 0.1% but potentially increase its QE bond buying program. 


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