Currency Market Analysis

Oct 09, 2020 | Currency Market Analysis

Global Themes

Across the board declines pushed the greenback to 2 ½ week lows. The U.S. dollar fell to more than two-week lows against the euro and Swiss franc and notched its lowest in three weeks against the Canadian dollar. The dollar was snubbed this week and on track for a second straight week of declines as investors staked bets on a Biden victory in the presidential election. A Biden victory would herald substantial stimulus, a rosier outlook that’s boosted confidence in the recovery and had Wall Street on pace for its best week since August. Sterling was little changed after disappointing U.K. data highlighted the weak and vulnerable shape of the world’s No. 5 economy. Next up: Canada’s September jobs report this morning that’s forecast to show slower hiring but also lower unemployment below 10%.

CAD

The Canadian dollar rallied to three-week highs after surprisingly robust hiring last month. Canada added a spectacular 378,200 jobs in September which knocked unemployment more than a percentage point lower to 9% from 10.2% in August. Most of the hiring came from the more meaningful full-time positions. The resoundingly positive data cemented expectations of strong third quarter growth. While negative rates may be in the Bank of Canada’s toolbox, they are not likely to be needed any time soon.

EUR

Europe’s single currency jumped to 2 ½ week peaks amid rising expectation of a Biden victory in next month’s U.S. presidential election. A Democratic win in the presidential race and potentially the Senate would herald substantial stimulus. Prospects of bold stimulus have buttressed Wall Street at the dollar’s expense, a currency that tends to outperform when stimulus negotiations hit a snag.

GBP

Sterling struggled to make gains against the weaker greenback after domestic data highlighted the vulnerable shape of the world’s No. 5 economy. Britain’s economy grew at a lackluster 2.1% in August, the slowest since the recovery commenced in May, compared to forecasts of 4.6% from July’s downgraded 6.4%. The growth survey came ahead of next week when data on Oct. 13 is forecast to show unemployment extending an ascent above 4%.


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