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Currency Market Analysis

Mar 12, 2021 | Currency Market Analysis

Global Themes

A stronger U.S. dollar Friday jumped above one-week lows as Treasury yields climbed. The greenback rose above one-week lows against the euro and sterling while the Canadian dollar stepped off two-week highs ahead of the country’s all-important jobs report. The buck has backpedaled from 3 ½ month highs after tame consumer prices this week allayed fears of faster inflation and tugged Treasury yields lower. But yields jumped anew Friday as focused shifted to hopes that America’s newly enacted $1.9 trillion American Rescue Plan would put the world’s biggest economy on a stronger path to recovery. At its peak early Friday, the yield on America’s benchmark 10-year note topped 1.6%. Today’s North American calendar features Canada’s February jobs report and a preliminary reading on U.S. consumer sentiment in March.

EUR

The euro slipped from one-week highs as the dust settled following another downbeat assessment of Europe’s economy this week from the European Central Bank. The central bank as expected left its interest rate at minus 0.50%. But in a bid to rein in rising yields, the ECB said it would ramp up its bond purchases by a significant amount to shore up a vulnerable recovery. The ECB’s worry over rising yields stood in contrast to the Fed which has downplayed higher yields and doesn’t consider the increase as disorderly.

CAD

Canada’s dollar pared declines after data showed the nation’s job market came roaring back. Canada netted 259,200 jobs in February, the most in 5 months, a massive amount that knocked unemployment down to 8.2% from 9.4%. Forecasts had called for a gain of 75,000 jobs and a jobless rate of 9.2%. The details of the data were mixed as wage growth moderated and the bulk of the hiring (171K) came from less meaningful part-time jobs. On balance, the sharp bounce back in hiring after employment had contracted the two previous months strengthened the case for the Bank of Canada to reduce its weekly bond purchases as soon as next month, a baby step toward policy normalization that would likely excite loonie bulls.  

GBP

The U.K. pound squandered a one-week high against the stronger dollar. Mostly subdued global markets and higher U.S. Treasury yields gave the greenback a fillip against its British counterpart. Sterling, nevertheless, was on track for a weekly gain as the latest U.K. growth data wasn’t as bad as expected while rapid vaccinations kept intact hopes for a stronger growth this year. Britain’s economy fell by 2.9% in January which wasn’t as bad as forecasts of a nearly 5% plunge.


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