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Currency Market Analysis

Feb 19, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar limped to the week’s finish line as downbeat jobs data cast a linger palling. The dollar’s fall lifted the euro and sterling with the latter bursting through a key ceiling, while Canada’s dollar strengthened to four-week peaks. The buck had been supported in recent days by bullish consumer spending data. But a surprise jump in unemployment claims served as a reality check and deflated optimism about the U.S. economic outlook. Down Under, the Aussie and kiwi dollars capitalized on the weaker greenback with the former flirting with three-year highs. The dollar’s data contusion also stemmed from better than expected numbers from Europe that tempered growth concerns. Next up: key indicators from the U.S. and Canada on factory growth and retail sales, respectively.

CAD

The loonie stuck near four-week highs as risk appetite and greenback weakness eclipsed downbeat news on the local consumer. Canadian retail sales plunged by a bigger than expected 3.4% in December which brought to a screeching halt a seven-month spending streak. Canada also forecast similar weakness for the next report on consumer spending. Consumers turning cautious corroborates the Bank of Canada’s forecast for first quarter growth to contract.

EUR

The euro rose Friday against the U.S. dollar, putting it on track for back to back weekly gains. The euro turned higher after U.S. jobs data disappointed and numbers from Europe topped expectations. An initial survey of German factory activity unexpectedly accelerated in February, evidence of resilience in the bloc’s biggest economy. Moreover, manufacturing growth in the broader euro zone also enjoyed surprise acceleration this month.

GBP

Mixed news on the U.K. economy wasn’t enough to slow the pound’s relentless rise. The pound rose to new 34-month peaks as Britain’s influential services industry flirted with growth this month, better than expected news that overshadowed grim consumer spending which tumbled by a bigger than expected 8.2% in January. The pound was also supported by improved risk sentiment Friday with global stocks mostly higher and broad-based greenback weakness.


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