Currency Market Analysis

Sep 22, 2020 | Currency Market Analysis

Global Themes

America’s dollar steadied with a firm bias after a surge this week to mid-August highs. The euro and Canadian dollar were subdued near six-week lows while the U.K. pound whipsawed after falling to two-month lows. The greenback’s September bounce gained traction after sliding global stocks triggered a stampede into safer assets. The wall of worry is growing amid rising Covid-19 cases around the world. To be sure, the U.K. today announced new restrictions aimed at slowing the rapid spread of infection rates. Moreover, investor skittishness also stems from elevated stock prices, rising tensions between the U.S. and China and the high stakes race for the White House. The dollar’s improved tenor will seek direction this week from a series of public speeches by Fed officials. Chairman Jerome Powell speaks today through Thursday on Capitol Hill.

GBP

Sterling tumbled to two-month lows in volatile trade Tuesday. The pound pared declines, though, after Britain’s central bank chief walked back remarks with respect to negative interest rates. Gov. Andrew Bailey said that last week’s statement didn’t imply that the Bank  of England would push interest rates from 0.1% to below zero. The pound is still saddled with downside risks stemming from surging virus cases that could further weaken the economy and the opened door to negative 

EUR

The euro edged closer to six-week lows as shaky risk sentiment helped underpin the safer greenback. Global stocks are dictating FX sentiment ahead of flash PMI surveys Wednesday from Europe. The performance of global equities along with the preliminary September data from Europe could shed light on how much leeway the euro has to the downside.

CAD

Canada’s dollar remained on its back foot after flirting with six-week lows. The loonie has fallen prey to a market slide over worries about rising coronavirus cases undermining the global recovery. USD/CAD has rebounded more than three cents since sinking to eight-month lows weeks ago. Canada’s next major event risk looms with a Sept 30. report on July growth.


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