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Currency Market Analysis

Jul 02, 2020 | Currency Market Analysis

Global Themes

The greenback fell to one-week lows ahead of a double-dose of American jobs data. The euro and sterling climbed to one-week peaks while Canada steadied. Markets were in a chipper mood ahead of readings today on June hiring and weekly jobless claims. The big focus is on nonfarm payrolls, a report expected to print somewhere between a cavernous range of a gain of 500K to 9 million. The more timely weekly jobless claims could show a moderating pace of improvement as the spike in coronavirus infections slows and in some cases stops reopenings. The buck has struggled to catch a sustained break amid signs of progress toward a vaccine and hopes that policymakers would redouble stimulus to keep the nascent recovery on track. Yet bouts of greenback weakness have been curbed by accelerating coronavirus infections that threaten fresh economic headwinds and renewed layoffs. 


Canada’s dollar steadied with markets sandwiched between Canadian and U.S. holidays. While steady, the loonie was on pace to strengthen for the week as improved risk sentiment and oil market gains buoyed the commodity-backed currency. Underlying sentiment remained fragile for the loonie on worries that the surge in coronavirus cases could undermine second half growth prospects. 


The greenback favored session lows after record hiring shaved more than two percentage points off unemployment. America netted a record 4.8 million jobs in June, exceeding forecasts of a gain of 3 million. The hiring surge pushed unemployment down to a still-high 11.1% from 13.3%. The dollar had a knee jerk move lower on the news. But since the data won’t clear the fog over what lies ahead for the economy, scope for dollar weakness appears somewhat muted. Weekly jobless claims printed at 1.427 million, above forecasts of 1.355 million, but below the previous week’s revised 1.482 million. 


The euro rose to one-week peaks as data and hopes for a vaccine fanned risk appetite. The single currency benefited from news that euro zone unemployment only inched up to 7.4% in May compared to forecasts of 7.7%. That showed government efforts bearing fruit in putting a lid on joblessness. 


Sterling notched one-week highs ahead of critical U.S. jobs data. The pound largely rode risk-on markets higher which allowed it to sidestep chronic concerns about the ultimate fate of Brexit and whether it would culminate with U.K. economy-negative trade tariffs starting early next year.

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