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Currency Market Analysis

Jul 13, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar index softened at the start of a busy week. Though broadly weaker, the dollar fared mixed with losses against the euro and Canadian dollar and gains versus the yen and sterling. America’s economy-driving consumer will be on the spotlight, one that it will share with a slew of key events like central bank meetings in Canada and Europe. Just how far down the road to recovery the world’s major economies have traveled will be gleaned from top-tier data. The week’s main sights are on U.S. indicators Thursday on retail spending and weekly jobless claims. Britain’s negative interest rate debate could see some swaying from growth, inflation and unemployment numbers. No policy changes are expected from the Bank of Canada Wednesday and the European Central Bank Thursday, events that could still jolt their respective currencies.


Canada’s dollar started the week stronger against the broadly weaker greenback. The loonie to some extent continued to bask in the afterglow of record hiring last week that showed Canada’s economy added more than 950,000 jobs in June, which tugged unemployment down 1.4 percentage points to 12.3%. Key for the loonie this week will be a 10 a.m. ET policy decision from the Bank of Canada Wednesday. No change from 0.25% is expected. A central bank that should emphasize downside growth risks would likely keep the loonie confined to its well worn ranges.


Sterling fell against both the dollar and euro to begin a risk-laden week. All eyes will be on British data Tuesday, Wednesday and Thursday on May growth, June inflation and May unemployment, respectively. Being top-tier indicators, they should speak to the policy outlook and the debate about whether the Bank of England will push interest rates, currently at 0.10%, below zero. The pound tends to falter when expectations of negative borrowing rates gain traction. 


A stronger euro hovered near one-month peaks against the U.S. dollar. Germany issues its influential ZEW survey of investor confidence Tuesday which is forecast to level off after bouncing higher in May and June. The euro’s main sights, though, are set to late week events. No changes are expected Thursday when the ECB issues a policy statement. The ECB’s forward guidance could still jolt currencies, however, particularly if President Christine Lagarde signals a readied stance to deliver more stimulus. A late week EU summit will be closely watched to see if leaders make progress toward agreeing on a €750 billion recovery fund. Doing so could potentially slingshot the euro higher.  

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