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Currency Market Analysis

Jul 20, 2020 | Currency Market Analysis

Global Themes

The greenback is nursing a weaker bias in stimulus-dominated trade. The trade-weighted buck neared six-week lows while the euro climbed closer to 2020 peaks. Sterling rose along with commodity counterparts like Canada’s dollar. Europe’s summit on stimulus went into extra innings with officials expected to resume talks today at 10 a.m. ET. The event was originally billed as just a Friday-Saturday summit. With fiscal authorities of the 27 EU countries continuing talks Monday, their persistence allowed the euro to notched fresh four-month peaks. A deal this week could leave the euro ripe for selling on the news. Nevertheless, the euro’s underlying bias has brightened as the bloc’s reopening process has gone more smoothly than the U.S. In Washington, meanwhile, lawmakers are expected to begin debate this week on another round of virus relief. 


Greenback weakness overshadowed softer oil markets to buoy Canada’s commodity-driven currency. Canada’s dollar also looked ahead to domestic numbers this week that are expected to show an improved economic pulse. Retail spending Tuesday is forecast to surge by 20% in May amid the loosening of lockdown measures. Canada’s headline annual rate of consumer inflation Wednesday is forecast to turn positive (+0.3% in June vs -0.4% in May) after two months of below zero prices.


Europe’s persistence toward agreeing on massive virus relief kept a wind at the single currency’s back, blowing it to 19-week peaks. The EU summit on virus aid began Friday and was supposed to conclude Saturday. Eventual agreement could potentially slow the single currency’s steady ascent. The euro also is approaching a critical technical top that if not cleared from a successful EU summit could deal its rise a setback. 


Sterling’s underperformance last week gave way to renewed buying Monday. The pound continues to move in fits when the focus shifts to weak U.K. fundamentals, and starts when global risk appetite increases. Ahead of late week British numbers on factory growth and consumer spending, the pound is likely to take its main cues from risk sentiment. Britain’s main economic event looms with a Friday print on retail sales which are forecast to post a solid gain (8%) for a second straight month in June. 

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