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Currency Market Analysis

Dec 02, 2020 | Currency Market Analysis

Global Themes

Stocks and the dollar took a breather Wednesday which helped the latter stage a muted comeback from 2 ½ year lows. A steady to firmer greenback edged above 2 ½ year lows against the euro while it rallied from a three-month trough against sterling. Canada’s dollar pared gains after rolling to fresh two-year peaks overnight. Caution returned to markets ahead of key U.S. jobs data today that will shed light on the extent to which the world’s biggest economy has moderated since the recovery started. That caution was validated as payrolls giant ADP said its report of private-sector hiring slowed by nearly 100,000 to 307,000 for November. America’s Fed chairman, Jerome Powell, testifies again on Capitol Hill today. Dollar sentiment has steadily deteriorated as high unemployment and a slowing recovery raise the stakes for bolder fiscal and monetary stimulus.  


Britain may be nearing distribution of Pfizer’s Covid-19 vaccine but it’s the health of the economy that remains a top worry. Sterling tumbled from three-month highs after the latest Brexit developments cast renewed doubt on the UK and EU reaching a trade agreement. With Brexit negotiations thought to be near a pivotal end game, the pound could be at heightened risk of volatility over the coming hours and days.


A modest overnight bounce for the weary dollar evaporated after more worrisome news about America’s recovery. ADP payrolls company said that private employers added an underwhelming 307,000 jobs in November, far fewer than an expected rise of 410,000. While the data isn’t the best barometer of how nonfarm payrolls, due Friday, might fare, it suggested a somewhat greater risk of disappointment. Forecasts call for nonfarm payrolls to slow to an increase of 500,000 in November, down from 638,000 in October which was the smallest gain in five months. Some whisper forecasts see scope for a negative number on Friday.


The euro steadied after an overnight surge to fresh 2020 peaks. The euro continues to thrive amid a weak dollar environment which for now has overshadowed tepid domestic economic fundamentals. A report today showed that euro zone unemployment was little changed at an elevated 8.4% in October. The high flying euro raises the risk of the ECB next week attempting to slow its ascent given the headwind it puts on exports, a leading growth engine.


Canada’s loonie surrendered some altitude after soaring earlier to fresh two-year highs. Risk appetite moderated with stocks and oil stepping back from recent peaks. That checked demand for commodity currencies which have been on a remarkable tear, helped by signs that a strengthening Chinese economy would help underpin a global economic upturn. Data this week showed that Canada’s economy rose at a record annual rate of 40.5% during the third quarter. The outlook for growth appears markedly less bullish as surging Covid-19 cases are expected to sap significant momentum from the economy.

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