Currency Market Analysis

Feb 15, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar was pinned near multiweek lows in holiday-light trade. The euro firmed while it was fresh three-week and three-year highs for the Canadian and U.K. currencies, respectively. Global markets were in a bullish mood which put haven assets on the defensive. For the dollar, rallies have only been as durable as U.S. data. Numbers last week dealt a setback to the notion of U.S. economic outperformance as inflation remained low and jobless claims remained high. Markets instead are focusing on optimism over vaccine rollouts and expectations for President Biden to deliver bold pandemic relief. Trading activity was muted with China off for the extended Lunar New Year, Canada observing Family Day and U.S. markets closed for Presidents’ Day. 

CAD

Canada’s dollar pushed to fresh three-week highs in holiday-thinned trade. Local markets are closed today for Family Day while it’s Presidents’ Day south of the border. Once back from the long holiday weekend, the Canadian currency could trade on prospects for local inflation Wednesday and consumer spending on Friday. Oil topping $60, a one-year high, bodes bullishly for commodity-backed currencies such as the loonie.

EUR

The euro firmed toward recent two-week highs against the softer greenback. The euro carried modest momentum into a week that will put a spotlight on the bloc’s economic fundamentals, news that if underwhelming could leave the single currency vulnerable. Germany issues its influential ZEW survey of investor confidence Tuesday and preliminary purchasing managers’ indexes on Friday. The euro zone Tuesday publishes how the 19-country economy fared during the fourth quarter.

GBP

Sterling appreciated by another penny against the greenback as it ascended to new 34-month highs. Market optimism over Covid-19 vaccines was a clear positive for the U.K. currency given Britain’s rapid rollout of inoculations. While sentiment has increasingly brightened toward the pound, some of today’s gains may have been exacerbated by thin holiday conditions with much of Asia and North America off. The pound’s fundamental sights this week are set to inflation data Wednesday and retail sales and preliminary PMIs on Friday.


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