Currency Market Analysis

Feb 12, 2021 | Currency Market Analysis

Global Themes

The greenback caught a broad boost Friday that helped it narrow weekly declines. The dollar rose above two-week lows against the euro, its weakest in three weeks against Canada, and its lowest since 2018 versus the U.K. pound. The dollar though was poised for a down week as lackluster U.S. data dampened the narrative of American economic outperformance. Weaker world markets Friday offered the dollar a safe haven bounce higher. Oil slipped below $58 after OPEC and other leading energy officials downplayed prospects of a meaningful recovery. News that Britain’s economy logged its worst year of growth in 300 years tugged the pound below 34-month peaks. The dollar’s bias turned neutral at best this week after inflation underwhelmed and jobless claims remained high all of which validated remarks from the Fed chairman to barrel full steam ahead with low rate policies.

CAD

Subdued oil markets left the loonie’s weekly gain against its U.S. counterpart in jeopardy. The loonie succumbed to a stronger dollar as slumping global markets helped whet appetite for safer bets. A sobering outlook for oil this year from OPEC and the International Energy Agency slowed the rapid surge in oil prices which had pushed closer to $60 this week, the highest level in more than a year.

GBP

Sterling pushed below 34-month peaks after data confirmed that 2020 was Britain’s worst year of growth in more than 300 years. The British economy contracted by nearly 10% last year when the economy largely went on lockdowns in a bid to slow the spread of the coronavirus. The economy grew 1% during the fourth quarter, however, which exceeded expectations. Britain’s economy appeared at risk of contracting anew in the first quarter with the economy enduring its third lockdown. The pound remained on track for a weekly gain against the greenback, a reflection of bullish expectations for the economy to bounce back as soon as the spring.

EUR

Weaker global markets and a stronger dollar nudged the euro off two-week highs. For the week, however, Europe’s single currency was poised for a gain as lackluster U.S. data overshadowed the bloc’s economic struggles. The euro faces daunting event risk next week in the form of German investor confidence Tuesday, and preliminary purchasing managers’ sentiment surveys from Germany and the wider euro bloc on Friday.  


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