Currency Market Analysis

Oct 12, 2020 | Currency Market Analysis

Global Themes

The U.S. dollar rose above multiweek lows in holiday-subdued trade. The euro eased off three-week peaks while sterling and Canada’s dollar inched below one-month highs. The dollar has kept to a range as stimulus optimism checks its rise but ongoing worries about the pandemic limit declines. Election developments have represented another headwind on the dollar as Biden’s lead in the polls tempers worries about a contested outcome. But sharing the spotlight with U.S. political developments are renewed restrictions in Europe to help counter a resurgence in coronavirus infections. Focus of the week ahead will be a late week European summit on Brexit and U.S. data on consumer inflation Tuesday and retail spending Friday. America’s bond market is closed today for Columbus Day, while Canada is off celebrating Thanksgiving.

GBP

Sterling softened from one-month highs but held above a key threshold against the dollar. The pound’s general buoyancy reflects hopes that Brexit talks later this week might make progress toward an elusive trade agreement. The pound will also contend with key U.K. data this week with a report on unemployment Tuesday forecast to rise to 4.3% from 4.1%. Britain’s jobless rate is perceived to be on a fast track higher over the balance of the year as a key government support scheme expires.

CAD

Tranquil holiday trade moved the loonie slightly below its strongest level in a month against the greenback. The loonie is fresh off its best week in four months when it appreciated by 1.4% against its U.S. counterpart. The loonie found twin pillars of support from stronger than expected domestic hiring last month, rising expectations of substantial U.S. stimulus, and election polls suggesting a lower risk of a contested presidential election. 

EUR

Coronavirus concerns pushed the euro off its highest level in nearly three weeks against the greenback. The single currency has outperformed as the dollar struggles on hopes that Washington was making progress toward massive stimulus to bolster a recovery that’s shown mounting signs of slowing. The euro was girding for data Tuesday on German investor morale that’s forecast to deteriorate in October with virus fears expected to dampen confidence in the recovery. 


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