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Currency Market Analysis

Mar 30, 2021 | Currency Market Analysis

Global Themes

Firing on all cylinders, the U.S. dollar climbed to fresh highs and its strongest level in a year against the yen. The euro slipped to new 2021 lows while rivals from Britain and Canada also favored their back foot. The buck is heading for month-end with a head of steam as Wall Street wavers in the wake of a big hedge fund’s default on a margin call while the Biden administration readied another tranche in the trillions in spending for infrastructure improvements. Meanwhile, the brightening outlook for the U.S. economy and the promise of accommodative Fed policy for a long time yet pushed the yield on the 10-year Treasury to fresh January 2020 above 1.75%. The buck’s uptrend could find support if data today on consumer confidence and Friday on the job market post the solid improvement that’s anticipated.


The loonie fell to three-week lows as Wall Street wavered and U.S. Treasury yields notched fresh highs, factors behind the dollar’s surge to new peaks. Oil eked out a gain Monday but lost ground Tuesday, pressuring commodity plays. Downside for the loonie was somewhat checked by expectations for Canada on Wednesday to post solid growth of around 0.5% for the month of January. Signs of a resilient economy would fit with the Bank of Canada’s brighter growth outlook, potentially allowing Ottawa to scale back some of its loonie-negative policy support in April. 


The euro slipped into a bigger hole for the year as it skid to another November low. Downbeat sentiment kept the euro from benefiting from data that showed a bigger than expected improvement in euro zone economic sentiment this month. Despite the evidence of economic green shoots, the euro’s downturn, coupled with expectations for Europe to lag far behind the U.S. in its recovery from the pandemic, has left it at a growing risk of testing its November low that’s a little more than a cent away. 


The U.K. pound favored the bottom of its range against the dollar, as U.S. Treasury yields pressed to new highs, burnishing the allure of dollar-based assets. Risk appetite, meanwhile, continues to waver after the recent margin call default by a big hedge fund that’s subjected investment banks in Japan and Switzerland to potentially significant losses. For the month, GBPUSD was on track to depreciate by 1.4% while it’s shed nearly 5 cents, or 3.5%, from its multiyear high in late February.

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