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Currency Market Analysis

Jul 09, 2020 | Currency Market Analysis

Global Themes

Caution ahead of a critical snapshot of America’s labor market helped the greenback stabilize after sinking to fresh lows. The buck overnight notched two- and three-week lows against rivals from Canada and Britain and its lowest in four weeks against the euro. U.S. weekly jobless claims are on tap today and forecast to edge below 1.4 million in the latest period. Good news on the labor market could be bad news for the dollar if should whet investor appetite for risk. The dollar’s latest leg lower stems from expectations that policymakers will provide enough stimulus to keep the recovery on track. Political risk has also entered the equation with America’s presidential election drawing closer.


The euro scaled four-week highs against its weaker U.S. counterpart. The euro received a fundamental shot in the arm as data depicted a recovering German economy. The bloc’s biggest economy logged a bigger than expected trade surplus of €7.6 billion in May which topped forecasts of €5.2 billion.


The British pound climbed to three-week highs as the dust settled on the government’s latest plan to help dig its economy out of the coronavirus-led downturn. The government announced this week that it would provide an additional GBP30 billion in support. With the pound testing the upper limits of its range it could see some profit-taking, particularly with Brexit uncertainty remaining elevated.


The dollar index steadied near four-week lows as players absorbed better than expected news on America’s job market. Weekly jobless claims printed at a still historically high 1.314 million in the latest period which wasn’t as high as forecasts of 1.375 million from a downwardly revised 1.413 million the previous period. Key for the dollar going forward will be whether the data ultimately bolsters risk assets at its expense or if the bigger than expected improvement offers the buck a fundamental boost.


Canada’s dollar climbed to two-week peaks on the eve of the nation’s jobs report. Ahead of the employment report, house starts topped expectations, coming in at an annual rate of 211,700 in June versus forecasts of just below 200,000. Market gaze, though, is set to Friday when Canada is expected to add around 700,000 jobs in June, a strong number seen pushing unemployment to 12% from record highs of 13.7%. The strength of the jobs report will speak to the outlook for central bank policy, a critical driver of loonie sentiment.

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