Currency Market Analysis

Aug 20, 2020 | Currency Market Analysis

Global Themes

America’s dollar steadied after a Fed-induced pop to highs for the week against a basket of rivals. The euro and Canadian dollar were little changed, while sterling recovered from one-week lows. Severe selling that drove the U.S. dollar to 27-month lows eased after minutes from the Fed’s last meeting were read as less dovish. The details of the Fed’s late July meeting stopped short of signaling an imminent shift to putting a lid on Treasury yields or allowing inflation to run hotter. While the Fed’s toolkit includes such measures, the tone of the minutes downplayed prospects of their imminent implementation which catalyzed some profit taking for of one of the summer’s blockbuster and profitable trades: shorting the greenback. The U.S. currency now looks to key jobs data today to see if initial claims improve which could buy it some time off its lows.

EUR

Profit-taking and less dovish Fed minutes caught up with and, for now, tamed the euro’s surge to 27-month peaks. The U.S. dollar caught a reprieve after the minutes of the last Fed meeting stopped short of signaling major moves like capping yields or allowing inflation to run above its 2% goal. Market positioning also left euro gains somewhat vulnerable with wagers on single currency appreciation at record highs. Europe issues key economic PMI surveys Friday that, if improved, could potentially be the euro’s ticket higher.  

USD

The U.S. dollar mostly weathered disappointing news on the job market which weighed on broader markets and offered a haven lift. Weekly jobless claims came in just above 1.1 million in the latest period, compared to forecasts to improve to 925K from a revised 971K the previous week. The data added to doubts about the sustainability of the recovery, a sore subject for the U.S. currency.  

GBP

A buoyant pound rose against both the greenback and euro. Sterling had earlier flirted with one-week lows against the central bank-buoyed dollar. The pound’s ability to hold its chin above key support triggered some renewed buying. Sterling will look for a fundamental steer Friday when Britain issues data on retail sales and preliminary August readings of services and manufacturing growth.  

CAD

A buoyant pound rose against both the greenback and euro. Sterling had earlier flirted with one-week lows against the central bank-buoyed dollar. The pound’s ability to hold its chin above key support triggered some renewed buying. Sterling will look for a fundamental steer Friday when Britain issues data on retail sales and preliminary August readings of services and manufacturing growth.  


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