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Currency Market Analysis

Feb 24, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar was anchored near recent lows after the head of the Federal Reserve this week vowed to stay the low rate course. The droopy dollar supported rivals with the euro around one-month peaks while sterling and the loonie rose to fresh April 2018 highs. The Aussie and kiwi dollars were at or near three-year peaks against their U.S. counterpart. Inflation may be rising but not expectations for the Fed to shift away from a low rate path. Fed chief Jay Powell acknowledged this week that the recovery was incomplete and that the central bank’s low rate policies would be needed for some time yet. The Fed staying the course has reinforced optimism in the economic outlook, boosting currencies with close ties to global growth. While the dollar has lost steam, its decline has been slowed by elevated Treasury yields.


Sterling raced to fresh 34-month highs overnight only to lose steam and begin the New York day little changed. The pound’s relentless hot streak has lifted it to a series of April 2018 peaks against its U.S. counterpart. A recent Brexit accord with the EU, coupled with Britain’s rapid rollout of coronavirus vaccines, has proven a compelling catalyst to fuel the pound’s resurgence.


The euro rose toward one-month highs after better than expected news on the German economy. Europe’s biggest economy fared better than expected during the fourth quarter, as revised data showed an upgrade to a 0.3% pace of growth from the first reported 0.1% increase. The revision moved Germany’s 2020 contraction just inside of 5%, to 4.9%, which was still the economy’s weakest showing since 2009.


The stronger loonie overnight power to fresh 2018 highs. Oil hovering near recent highs above $60 boosted the commodity-linked Canadian dollar, gains that were compounded by the weaker greenback. Global optimism continues to buoy the loonie, allowing it weather domestic headwinds stemming from elevated unemployment above 9% that has led to renewed consumer caution.

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