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Currency Market Analysis

Aug 10, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar held firm and above two-year lows, boosted by the previous week’s influential jobs survey. Across the board gains Monday kept the greenback above five-month lows against sterling and the loonie and its weakest in over two years versus the euro. The U.S. unit also rose against the Aussie and kiwi dollars and emerging markets. America’s July jobs report peeled away a layer of greenback negativity, as it showed that employers boosted payrolls by nearly 1.8 million. The print cleared forecasts of 1.6 million and allowed for a bigger than expected improvement in unemployment which receded to 10.2% from 11.1%. While the data still depicted a slowing job market, it suggested it was faring better than previously thought. Adding to the buck’s tentatively improved tone, broader risk appetite was checked by ongoing U.S.-China tensions and the uncertain outlook for U.S. fiscal stimulus despite the president’s executive orders.


The U.K. pound was somewhat subdued ahead of critical numbers on Britain’s economy this week. Sterling moved 1 ½ cents below recent five-month peaks ahead of British data Tuesday that’s forecast to validate Bank of England forecasts of rising unemployment. Forecasts call for Britain’s jobless rate to jump to 4.2% from 3.9%. Also lurking ominously are growth figures Wednesday that are expected to show the economy contracted 20.9% during the second quarter. This week’s data will test the durability of the pound’s recent hot streak.


The euro neared one-week lows against the data-boosted greenback. The euro’s surge to May 2018 highs last week suffered a setback in stronger than expected U.S. hiring last month. America’s payrolls report, while volatile, suggested the labor market was firing on more cylinders than it had recently been given credit. Next to sway the euro will be German investor optimism Tuesday and euro zone second quarter growth on Friday.


The loonie alternated between modest gains and losses Monday, following mixed jobs data last week. Canada added nearly 420,000 jobs in July, above forecasts of 400,000. But most of the hiring (i.e. more than 345,000) came from less desirable part-time positions. The data was consistent with Canada’s job market starting to moderate after record hiring of more than 950,000 in June.

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