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Currency Market Analysis

Jun 23, 2020 | Currency Market Analysis

Global Themes

Recovery optimism kept the U.S. dollar tilted on its back foot. The euro strengthened, the yen weakened, while commodity currencies extended gains. No doubt about it green shoots in France, the bloc’s No. 2 economy, rewarded the euro with a rally, lifting it above a three-week bottom. Preliminary data showed a surprise return to growth for France’s factory sector in June. Sterling was little changed despite better than expected British business surveys. The greenback also emerged weaker after an overnight roller-coaster ride for the U.S.-China trade deal. The trade deal is a sensitive subject for markets, explaining their overnight tumble when it appeared that the agreement was in doubt. A tweet from President Trump saying the deal was “fully intact” boosted risk appetite at the expense of safe havens. A reading on U.S. factory activity is also on tap and, if better, could help the dollar rebound.

CAD

Canada’s dollar flirted with two-week peaks, boosted by oil clocking fresh highs and hopeful signs of the coronavirus loosening its grip on the world economy. A nearly 2% rally lifted crude above $41, the highest in more than three months. A dearth of domestic data has left the loonie at the mercy of global developments which for now are focusing on the bright side following better data from Europe.

EUR

The euro climbed out of its biggest hole in three weeks after surprisingly good news on the euro zone’s second biggest economy. France’s flash, or preliminary, reading of June manufacturing hopped back into growth territory with a reading of 52.1 from 40.6 in May. The print leapfrogged expectations of a contractionary 46, adding to global recovery optimism, a narrative that’s weighed on the safe haven dollar.

GBP

Sterling weakness against the euro cast a general pall over the British currency, checking rises versus the greenback. Consequently, the pound held within reach of three-week lows against the dollar and a three-month trough against the data-inspired single currency. While subdued, downside for sterling appears limited thanks to better than expected news on Britain’s economy-driving services sector whose PMI climbed a tick above 50 in June, allaying worries about its economic health.  


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