Currency Market Analysis
Jul 01, 2020 | Currency Market Analysis
Havens dash out of Q3 gates
Safe haven currencies got off to a quick start to the third quarter as Wall Street made a wobbly debut after its best quarter in decades. The U.S. dollar topped the euro but the yen leapfrogged the greenback. America’s currency otherwise was broadly firmer with gains against the U.K. pound and commodity rivals from Canada and Down Under. It may be a new quarter but the same boom and gloom drivers remain in place, keeping currencies on choppy terrain. Recovery optimism continues to come in fits and starts amid the gloom over what the surge in Covid-19 cases means for the economic outlook. Holiday mode has descended on markets amid Canada Day today and U.S. markets closed Friday ahead of Independence Day. Holiday-light trade could exacerbate any volatility triggered by U.S. data today and tomorrow on the job market.
The euro slipped on caution ahead of U.S. numbers that are expected to depict the world’s biggest economy on the road to recovery. Downside risk, though, appeared muted for the single currency following recovery-friendly numbers from Europe. German unemployment only inched higher to 6.4% in June compared to forecasts of a jump to 6.6% from 6.3% in May.
The greenback held firm after mixed news on America’s job market. ADP reported a surge of 2.4 million private jobs in June which fell short of forecasts of an increase of 3 million. The big news was a massive upward revision to May when private employers added 3 million jobs compared to the initially reported loss of 2.8 million. While impressive, today’s jobs report won’t allay worries about the job market starting to lose steam.
Sterling steadied Wednesday after data confirmed that Britain’s manufacturing sector bounced back and slightly above the boom/bust 50 line with a reading of 50.1 in June. Sterling closed out the month of June with a rally driven mostly by its ability to hold above key support. GBPUSD is currently trading around its midpoint exchange rate for the year with Brexit uncertainty contributing to its YTD decline of more than 6%.
Canada’s dollar was flat to subdued in holiday trade with the country observing Canada Day. Canada’s currency outperformed the greenback in June when it advanced by 1.4%. For the year, though, USDCAD holds the upper hand, up about 4.5%.
Get the daily currency market analysis in your Inbox
Published five days a week, this newsletter provides day-to-day trends and activities affecting the market in easy-to-understand snapshots.