Currency Market Analysis

Jul 06, 2020 | Currency Market Analysis

Global Themes

A weaker U.S. dollar flirted with two-week lows, undermined by energized global markets. The euro was the star performer while sterling and the Canadian dollar posted more modest gains. Recovery optimism is overshadowing worries that surging coronavirus cases could slow or stall economic progress. The greenback is being dumped as economic green shoots lead many to chase risk currencies. Data painting a better picture of global growth is buoying sentiment. America posted record job growth in June while numbers today from Europe showed double-digit gains for Germany factory growth and euro zone retail sales. Markets are also guardedly optimistic that this week’s U.S. weekly jobless claims, due Thursday, will improve below 1.4 million for the first time in months. 

CAD

Canada’s dollar favored session highs and nearly two week peaks against its U.S. counterpart. Wall Street signaling a bullish start to the week boosted growth-geared currencies such as the loonie. The loonie’s fate this week is seen tied to Canada’s June jobs report Friday. An expected surge of 700,000 jobs is forecast to drive unemployment to 12% from record highs of 13.7% in May. An upside surprise could be the loonie’s ticket higher.

EUR

The euro flirted with two-week peaks as global markets cheered fresh signs of economic recovery. Europe contributed to the improving mood thanks to German industrial orders bouncing back in May with a strong 10.4% gain. The broader euro zone saw retail sales growth of some 17.8% in May. While stronger, the euro remains confined to its range against the greenback.

GBP

Sterling rose but its gains lacked the oomph that the euro enjoyed against its U.S. rival. The pound is benefiting from a global rally in risk assets like equities. Sterling continues to contend with headwinds related to Brexit and domestic economic uncertainty that’s kept the door open to the prospect of the Bank of England resorting to subzero interest rates to jump start the world’s No. 5 economy.


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