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Currency Market Analysis

Oct 05, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar softened as risk appetite improved to begin the week. The dollar slipped against the euro and sterling and fell to two-week lows against the Canadian dollar. The buck is taking its cues from wavering U.S. political developments. Reports that President Trump is on the mend after testing positive last week for Covid-19 offered some reassurance to global markets. The president’s health is critical to keeping the coming election on track and can factor in to whether Washington soon agrees on a massive stimulus package at a time when the U.S. economy is showing mounting signs of slowing. Data Friday showed that American employers added jobs for the fifth straight month in September, but the pace of hiring has decelerated since July. The buck is keeping toward the middle of its range and will look for direction this week from the president’s health, services growth today and a speech tomorrow by Fed Chairman Jerome Powell.

GBP

Sterling firmed but underperformed other European currencies as Brexit uncertainty checked gains. High-level Brexit talks over the weekend between Britain’s prime minister and the president of the European Commission merely agreed to step up negotiations. The pound remains a barometer of confidence in the U.K. and EU reaching a trade deal by the year-end expiry of the transition period. The U.K. economy will come under close scrutiny Friday when the government releases monthly growth for August which is forecast to slow.

CAD

Canada’s dollar rose to two-week peaks, boosted by stronger global stocks and oil surging more than 4% to $38. Risk sentiment continues to waver as it takes its cues from President Trump’s health and prospects of Washington reaching a deal on stimulus to keep a moderating recovery on track. Canada issues its all-important September jobs report Friday. Forecasts call for hiring to slow for a third month in a row to around 160,000. Unemployment is seen around 9.7% from 10.2% in August.

EUR

The euro snapped back along with risk assets Monday. In addition to improved risk tolerance, the euro found support from better than expected European data on services growth and consumer spending. Like the U.S. dollar, the euro has kept to the middle of its recent ranges as elevated political risk in the U.S. tempers risk sentiment. 


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