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Currency Market Analysis

Feb 09, 2021 | Currency Market Analysis

Global Themes

Building on a two-day skid, the U.S. dollar slipped to one-week lows against a broad basket of rivals. The dollar’s retreat boosted its counterparts with the euro and Canadian dollar at one- and two-week highs, respectively, while the U.K. pound scaled April 2018 peaks. The dollar is experiencing a recurring hangover from last week’s lackluster U.S. jobs report that served as a reminder of the still-fragile shape of the world’s biggest economy. Meanwhile, wavering Treasury yields have undercut dollar gains, especially against the interest rate-sensitive yen. The dollar also has lacked a catalyst to sustain its recent breach of a key psychological level against the euro. Currencies could get their next jolt from U.S. inflation data Wednesday, the same day that the Fed chairman speaks, weekly jobs data Thursday, and a Friday reading of consumer sentiment which is expected to brighten.


Sterling rolled to 33-month highs against the broadly weaker greenback. But like the dollar, sterling also retreated from recent multimonth peaks against the euro. The pound has found sturdy pillars of support from the U.K.’s impressive inoculation campaign that’s suggesting brighter times ahead for Britain’s economy. Meanwhile, expectations of a recovery this year suggest a closing door to prospects of the Bank of England adopting subzero lending rates. The high-flying pound faces a key test of strength in Friday numbers on growth and factory output.


The loonie steadied around two-week highs against the softer greenback. Oil has been the main tone-setter for Canada’s currency this week amid a lack of much domestic data. That’s been a good thing with oil, having topped $58 earlier in the session, marching steadily toward $60, terrain last touched in early 2020.


The euro climbed to one-week highs, extending a rebound from two-month lows. Europe’s single currency has benefited from the dollar’s lack of a driver to sustain its recent foray through a key threshold. The recent dimming in euro sentiment suggests somewhat limited scope for a major rebound as rallies could give way to renewed selling. Slightly better news on Germany’s economy added to the euro’s recovery as the country’s trade surplus steadied just above EUR16 billion in December which topped expectations. 

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