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Currency Market Analysis

Jul 27, 2020 | Currency Market Analysis

Global Themes

Same story, new lows for the U.S. dollar. The greenback tumbled to March lows against the yen and sterling, slipped to near two-year lows against the euro, and hit its weakest in five years versus the Swiss franc. No sign of the coronavirus abating in the U.S. means no sign of a bottom for the greenback. America’s struggle to slow the resurgent virus has dampened confidence in officials engineering a quick recovery. Meanwhile, economic worries intensified last week after weekly jobless claims unexpectedly rose. Congress not agreeing to new aid just as some stimulus measures are set to expire this week is exacerbating dollar negativity. The coming week is loaded with major risk events like a Fed policy decision Wednesday and U.S. second quarter growth Thursday, the same day that fresh news arrives on the state of the labor market.


A sinking U.S. dollar translated into a swimming U.K. pound. Sterling soared to March peaks as the greenback descended into a deeper hole and investors showed an appetite for risk with global stocks higher. With the dollar the dominant story, it’s helped the pound brush aside for now vulnerabilities stemming from a weak economy and persistent Brexit uncertainty. A lack of much U.K. data this week could see the pound takes its cues from external drivers like the greenback’s performance.


The euro’s bull run catapulted it to new September 2018 peaks against the greenback. The single currency is enjoying twin tailwinds in the form of optimism over Europe’s outlook which contrasts growing negativity across the pond where surging coronavirus infections in the U.S. dampen hopes of a quick recovery. Underscoring Europe’s improved outlook, a gauge of German business confidence improved for the third month in a row. Germany’s influential Ifo survey jumped to 90.5 in July, above forecasts of 89.3, from an upgraded 86.3 in June.


Stronger oil and a weaker U.S. currency kept the loonie near recent multiweek peaks. The loonie last week notched six-week highs as the greenback tumbled and U.S. weekly jobless claims rose for the first time since late March, highlighting a vulnerable U.S. economy as officials struggle to contain the coronavirus. Canada’s top event risk arrives with a Friday survey that’s forecast to show its economy grew by 3.5% in May after a record contraction of more than 11% in April. Oil was around $41.65, up nearly 0.9% on the day.

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