Currency Market Analysis

Jun 19, 2020 | Currency Market Analysis

Global Themes

Risk-on trade resulted in a mixed but mostly steady U.S. dollar. The buck was little changed against the euro and yen, keeping it near two-week peaks versus the former, while it extended the previous day’s rally against a data-dented U.K. pound. Markets are looking on the bright side and hoping for better economic times ahead, a rosier narrative buoying stocks, the greenback to some degree, along with commodity currencies and emerging markets. Data showing record strength in consumer spending, America’s growth engine, awakened some dollar bulls from a recent slumber. Underscoring the dollar’s recent struggles, it’s poised for its best week in a month with an advance of about 0.3%.

GBP

Sterling’s slide accelerated Friday, sending the U.K. currency to nearly three-week lows, as dire news on Britain’s fiscal health overshadowed a bigger than expected bounce back on local consumer spending. Retail sales soared by 12% in May, more than double forecasts of a 5.7% increase. The pound took its main cue from a record surge in public borrowing which topped 100% of GDP for the first time since 1963.

CAD

Canada delivered on expectations of a sharp plunge in spending as retail sales plummeted by 26.4% in April, far exceeding forecasts of a 15% tumble. Yet the loonie held its ground as markets remained in risk-taking mode, albeit cautiously, while a 3% rally drove oil prices above $40. Hopes that April marked the peak of economic damage from the coronavirus also helped the loonie weather the disastrous news on the Canadian consumer.

EUR

The euro was broadly flat for both the session and the year, having squandered the bulk of a rally that had pushed it to three-month peaks. The euro largely sat on the sidelines as EU leaders held a summit to try to agree on a proposed coronavirus fund of €750 billion. A more best case scenario is for some sort of compromise deal as soon as next month. Leaders remain at odds over whether the money should be grants or loans, as the so-called “frugal four” nations of Austria, Denmark, the Netherlands and Sweden prefer.


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