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Currency Market Analysis

Jul 08, 2020 | Currency Market Analysis

Global Themes

Currencies dither along with risk sentiment

The greenback wavered as risk sentiment improved after Wall Street’s slide the previous day. The buck slightly favored its back foot versus peers from Europe and Canada. The yen was little changed. A light week of U.S. data has put a heightened focus on coronavirus headlines. The rise in infection rates has put a damper on recovery hopes. Currencies have largely consolidated amid the back and forth of optimism over the economic outlook. The buck tends to struggle when Wall Street rallies. Yet the bumpy road to recovery has put a bit of a floor under the greenback. Today’s trade is likely to be driven by an update from Britain’s Treasury chief and Wall Street’s performance ahead of tomorrow when news on weekly jobless claims arrives.

GBP

Sterling held within reach of three-week highs against the dollar following remarks today by Rishi Sunak, Britian’s Treasury chief. Mr. Sunak announced a program to pay employers to bring back furloughed workers in a bid to stave off a labor market meltdown. The news had little impact on the pound which remained firmer on the day, a reflection of improved risk sentiment. Brexit uncertainty continues to keep a relatively low ceiling above the pound.

CAD

Canada’s dollar ticked up after an overnight flirt with one-week lows. Worries about surging coronavirus infections south of the border have rattle markets and commodity-oriented currencies. A tentative pick up in risk sentiment did the same for the loonie. On tap today is a fiscal update, a sensitive subject for the loonie in the wake of a recent ratings downgrade, from Canada’s finance minister, Bill Morneau.

EUR

The euro firmed toward recent two-week peaks as Wall Street futures signaled a green start to Wednesday trading. Improved, though still fluid, sentiment buoyed risk currencies like Europe’s shared currency. Downside swings in the euro have been limited on the view that Europe might recover from the coronavirus ahead of the U.S. where infection rates have accelerated and dampened confidence about a V-shaped economic rebound.


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