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Currency Market Analysis

Jul 28, 2020 | Currency Market Analysis

Global Themes

Turbocharged rallies that propelled the euro and gold higher abated on the eve of a U.S. central bank decision, moves that tempered selling pressure on the greenback. The buck steadied above seven-week lows against the Canadian dollar, its lowest in four months against sterling, and its weakest in nearly two years against the euro. The Federal Reserve today kicks off a two-day meeting that will conclude Wednesday with a 2 p.m. statement. No major policies changes are expected other than the likelihood of the central bank acknowledging an uptick in economic gloom. A Fed that signals a readiness to deliver more stimulus would underscore the fragile shape of the economy which has been among the root drivers of the dollar’s decline. Ahead of the Fed tomorrow, a 10 a.m. ET report today is forecast to show a reduction in U.S. consumer confidence.


Canada’s dollar surrendered some strength after climbing overnight to nearly seven-week highs. The loonie’s rally succumbed to profit-taking ahead of area growth data later this week, a pullback also catalyzed by oil, down 0.3% to $41.47, paring recent gains. Forecasts suggest Canada’s economy returned to growth by around 3.5% in May after a record drop of 11.6% in April.


The euro’s turbocharged surge to nearly two-year peaks abated on caution ahead of a Fed decision tomorrow. The euro’s remarkable, more than 10-cent tear from March lows has been driven by expectations that the bloc’s economy could emerge less scathed from the pandemic than the U.S. While pre-Fed caution tapped a brake on the euro, how soon it re-depresses the gas pedal may hinge on big ticket data from the euro zone Thursday on unemployment, and Friday on second quarter growth and inflation. 


The U.K. pound steadied, albeit near fresh March peaks against its woozy U.S. counterpart. Sterling has capitalized on broad based negativity toward the U.S. unit which has overshadowed for now chronic pound vulnerabilities like Brexit uncertainty. The pound also found support after a gauge of U.K. consumer spending unexpectedly grew in July which offered evidence of a third quarter rebound.

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