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Currency Market Analysis

Aug 07, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar jumped above two-year lows as risk appetite dissipated ahead of America’s monthly jobs report. As a result, the greenback rose above five-month lows against sterling and the loonie and its weakest in two years against the euro. Escalating tensions between the U.S. and China and still no deal in Washington on another round of pandemic relief added to the cautionary, dollar-friendlier backdrop. Market players are looking with trepidation to today’s July jobs report for a sense of how weak the U.S. economy remains after its historic contraction of nearly 33% during the spring quarter. Median estimates are pegged at 1.6 million new hires last month which is seen lowering unemployment to a still-high 10.5% from 11.1%. For the buck to rebound, it would help if the data proves stronger than expected which would allay economic angst.


Sterling fell from five-month highs after the dollar caught a relief rally in the wake of better than expected news on American hiring. Pullbacks in the pound may prove relatively short-lived after the Bank of England this week left policy unchanged, dialed down its economic gloom, and stopped well short of signaling negative interest rates anytime soon.


The dollar kept its chin above two-year lows after stronger than expected hiring tempered for now pandemic-induced U.S. economic uncertainty. The dollar rose after America netted nearly 1.8 million jobs in July which came well above whispers of a negative number. Strong hiring, above forecasts of 1.6 million, lowered the jobless rate to 10.2% from 11.1%. The data is still consistent with the U.S. recovery losing steam. Consequently, the data isn’t likely to meaningfully arrest the dollar’s fall.


The euro fell to session lows after stronger than expected hiring across the Atlantic tempered U.S. economic angst. America adding nearly 1.8 million jobs in July stoked a relief rally for the oversold greenback. While welcome news, today’s U.S. employment data isn’t likely enough to derail the euro’s summer surge to more than two-year peaks.


The loonie fell from five-month highs after data showed better than expected news on the nation’s job market. Canada added 418,500 jobs in July, topping forecasts of 400,000. Robust hiring, though slower than June’s record increase of 952,900, lowered unemployment to 10.9% from 12.3%. Upside traction for the loonie may prove limited, however, as the majority of hiring came from less meaningful part-time positions. 

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