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Currency Market Analysis

Oct 02, 2020 | Currency Market Analysis

Global Themes

The greenback fared mixed but mostly firmer after shock news that America’s first couple had tested positive for the coronavirus. The dollar rose against the euro and the commodity trio from Canada, Australia and New Zealand. But the yen, another safe haven, rose as did the U.K. pound ahead of weekend Brexit talks between Britain’s prime minister and the president of the European Commission. President Trump and the first lady testing positive for Covid-19 heightens already elevated U.S. political uncertainties. Markets were already on edge over whether Washington would agree on more pandemic relief. Uncertainty over the path that the virus takes for the president overshadowed what had been billed as the week’s biggest event: The final nonfarm payrolls report before the election.

USD

The dollar’s haven boost gained traction after U.S. job growth proved far weaker than expected last month, adding to worries about the global recovery from the pandemic. America added 661,000 jobs in Scepter, below forecasts of 850,000. Unemployment dropped to 7.9%, a new pandemic low but that was largely for an undesirable reason: A reduction in the size of the workforce. The dollar is finding safe haven favor which is overshadowing concerns about a moderating pace of recovery in the world’s biggest economy.

EUR

The euro fell after the leader of the free world tested positive for Covid-19 and area data showed a bigger than expected fall in inflation. President Trump and the first lady testing positive for a disease that’s killed more than 200,000 Americans weighed on global markets and spurred a flight to safety in the greenback. Euro sentiment also dimmed after preliminary data showed that euro zone inflation fell further below zero, printing at minus 0.3% in September. Inflation veering further away from the ECB’s near 2% goal will increase pressure on the central bank to boost its already copious amounts of currency-negative stimulus.

CAD

A more than 3% slide in oil to $37 pushed the loonie down from one-week highs. President Trump’s positive Covid test has weighed on global markets including energy. Moreover, worries about a moderating pace of recovery south of the border following the weakest pace of hiring since the recovery started in May bodes better for safer assets like the greenback. Canada issues its monthly employment for September next week on Oct. 9.

GBP

Sterling rose but remained on a choppy footing with global markets in selloff mode after President Trump tested positive for the coronavirus. The pound rose ahead of planned Brexit talks this weekend between U.K. Prime Minister Boris Johnson and the president of the European Commission in a bid to forge an elusive trade agreement. Sterling continues to fluctuate as a barometer of confidence toward an amicable trade deal.   


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