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Currency Market Analysis

Jul 22, 2020 | Currency Market Analysis

Global Themes

U.S. dollar’s slide accelerates 

America’s wilting dollar fell through another floor overnight as the euro charged to fresh highs. The fiscally-energized euro soared to October 2018 highs, boosted by an historic EU agreement this week on disbursing aid to coronavirus-throttled European economies. Currencies otherwise stuck to the rise-on playbook despite global equity market weakness. World stocks retreated as Covid-19 cases continued to climb and the U.S. ordered the closing of China’s consulate in Houston, further souring relations between the world’s two biggest economies. Sterling slipped from six-week peaks, but commodity currencies like the loonie and Aussie held near recent peaks. While greenback sentiment continues to erode, a more skittish market backdrop could help slow its slide. The recovery story remains broadly intact, a sore subject for the greenback as accelerating coronavirus cases complicate America’s economic outlook. Meanwhile, uncertainty is rising over whether Washington will agree to another round of stimulus by month-end.


Europe’s watershed agreement this week on fiscal stimulus kept the euro pointed skyward as the single currency scaled October 2018 peaks. Europe reached an historic agreement on fiscal stimulus that bolstered confidence in its handling of the coronavirus pandemic which stood in contrast to the situation in America where cases continue to climb and lawmakers struggle to reach consensus on another round of stimulus.


Sterling took its main cue from global risk sentiment which wavered as relations between the U.S. and China soured overnight. The big concern is that growing tensions between the world’s two largest economies could threaten to unravel their hard fought trade agreement. Though weaker, sterling remained within a hair’s breadth of six-week peaks against the greenback.


A risk appetite-buoyed Canadian dollar hovered near six-week peaks. Capitalizing on broad greenback weakness helped Canada’s commodity-driven currency weather weaker oil. A 1.5% decline in crude pushed prices below $42. USDCAD favored session lows after a bigger than expected rise in Canadian headline inflation to an annual rate of 0.7%, a still low level that will keep the outlook for steady interest rates intact.

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