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Currency Market Analysis

Mar 22, 2021 | Currency Market Analysis

Global Themes

The greenback made a tepid start to the new week as Treasury yields receded and haven rivals from Japan and Switzerland outperformed following Turkey’s surprise weekend sacking of the country’s central bank governor. Major currencies remained rangebound with the euro, sterling and Canadian dollar firming after losing ground last week to the U.S. dollar. Setting a skittish tone for emerging markets, Turkey’s lira plunged around 10% against the greenback after Turkish President Recep Tayyip Erdogan fired Naci Agbal after the central bank chief last week raised interest rates by 200 basis points to 19% in a bid to fight inflation which has topped 15%. The Turkish news dominated ahead of a trio of speaking appearances this week by Fed Chairman Jerome Powell and key U.S. indicators on housing, fourth quarter growth and consumer spending. Turkish developments prompted a flight to safety that nudged the yield on 10-year Treasury below 1.7%.


Canada’s dollar inched higher after it lost the handle on three-year highs last week and finished the week behind the greenback. Loonie bullishness has been dampened by renewed oil market volatility. Oil was subdued Monday around $61 after it shed more than $4, or 6.4%, last week on worries that Europe’s pandemic-related woes could impact energy demand. A dearth of Canadian data this week is likely to see the loonie look to external drivers, like oil and the greenback, for its main cues.  


The euro firmed against the dollar, a currency that lost ground as Treasury yields receded. The single currency has been confined to a narrow range with upside frequently undercut by the bloc’s struggles to combat the resurgent coronavirus. The euro has fallen over two of the past three weeks against the dollar and will look for direction this week from preliminary factory surveys Wednesday and a gauge of German business confidence Friday. 


Sterling neared a one-week low against the greenback ahead of a slew of U.K. numbers this week that could underscore the Bank of England’s cautious outlook. Unemployment Tuesday is forecast to rise for the seventh consecutive month in January to fresh multiyear highs further above 5%. Wednesday heralds fresh news on Britain’s services and manufacturing sectors, while consumer spending looms Friday. Outcomes that play up near-term economic weakness could keep sterling anchored toward the lower end of its ranges. 

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