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Currency Market Analysis

Feb 08, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar edged higher after a payrolls-induced fall on Friday. Across the board gains lifted the greenback against the euro, sterling and Canadian dollar. The U.S. unit also ticked higher against the Aussie and kiwi and emerging markets. The buck had its rally to two-month highs checked last week after lackluster jobs data tempered optimism about America’s recovery prospects. The world’s biggest economy added fewer than 50,000 jobs in January, while unemployment eased to a March low of 6.3%, evidence of a still-struggling labor market. But as the dust settled from the payrolls report it left intact the notion that the U.S. economy remained a leading engine of global growth, a bullish theme that’s putting upward pressure on stocks, bond yields and the greenback. Focus of the week ahead will be a midweek speaking appearance by Fed chairman Powell and news on the U.S. consumer with inflation Wednesday and sentiment data Friday.


The euro pared some of its U.S. payrolls-inspired gains, though it remained above a key psychological threshold against the greenback. Still, underlying sentiment toward Europe’s shared currency remained less than bullish following more worrisome news on the German economy. Industrial output in the bloc’s biggest economy unexpectedly stagnated in December, evidence of a loss of momentum that could leave growth at risk of a first quarter contraction.


The loonie softened against the broadly firmer greenback Monday. But downside for the Canadian currency was checked by oil edging closer to $60. The price of crude edged further above $57, reaching new one-year peaks. The loonie otherwise appeared on shaky fundamental ground after data Friday showed that Canada bled nearly 213,000 jobs in January, the biggest decline in nine months, an outsized amount that sent unemployment soaring to 9.4%, the highest in five months, from 8.6%.


Sterling softened against the greenback after rising last week for the fourth time in as many weeks. The pound has outperformed of late with bulls impressed by the U.K.’s expeditious vaccine rollout that’s helped to brighten the medium-term outlook for growth which in term suggests a lower risk of the Bank of England having to resort to negative interest rate policy to pull the economy out of its pandemic-induced downturn. Britain issues Q4 growth on Friday, data likely to serve as a key litmus test of sterling sentiment. 

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