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Currency Market Analysis

Feb 22, 2021 | Currency Market Analysis

Global Themes

A subdued greenback cut losses after slipping overnight to new multiyear lows versus counterparts from Britain, Canada and Down Under. The euro strengthened following a bigger than expected improvement in German business optimism. Broader markets were weaker as attention turned to Washington where voting could get under way this week on the Biden administration’s $1.9 trillion pandemic relief plan. The dollar continues to wax and wane with U.S. data that have painted a mixed picture of the world’s biggest economy. America’s weak job market continues to pull the rug from under greenback rallies as it bolsters conviction in the Fed’s low rate outlook for the foreseeable future. Key focal points this week include congressional testimony by Fed Chairman Jerome Powell on Tuesday and Wednesday, British unemployment on Feb. 23, and U.S. personal spending Friday.

CAD

Canada’s dollar steadied after an overnight jump to April 2018 peaks against the greenback. Oil held firm, boding well for underlying loonie sentiment, near $60. Investor appetite for risk faded with most global stocks in the red as markets ponder the outlook for the world economy and whether there is adequate stimulus available to hasten a durable recovery later this year. Canada’s next big event risks are spread over coming weeks with fourth quarter growth on March 2 and the Bank of Canada’s next policy announcement on March 10.

GBP

Sterling steadied after an overnight surge to fresh peaks against the U.S. dollar, its strongest since April 2018. Caution caught up with sterling as global risk sentiment moderated as attention turned to the uncertain outlook for President Biden’s massive Covid-19 relief package where voting in the U.S. House could start as soon as this week. The pound also had its rally cooled by caution ahead of event risk Tuesday when Britain issues fresh unemployment which is expected to extend a rising trend to 5.1%, a multiyear high, in the three months ending in December, from 5%.

EUR

Better than expected data from Germany helped the euro get off to a quick start to the week against the greenback. Germany’s influential Ifo survey of business confidence topped expectations, rising to a four-month high of 92.4 in February. That marked a healthy improvement from January’s 90.1 print which was the lowest in six months. Signs of a resilient German economy boosted the euro. Still, significant uncertainties remain given the flattening in the pace of decline of new infections.


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