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Currency Market Analysis

Apr 02, 2021 | Currency Market Analysis

Global Themes

The greenback steadied below recent highs for the year ahead of today’s U.S. jobs report that could validate optimism in the outlook for the world’s biggest economy. Trading activity was muted with many regions closed for Good Friday. The dollar was broadly flat against the euro and yen while rivals from Britain and Canada eased off 10-day peaks. The employment report is expected to show faster hiring of around 650,000 jobs in March as measures to tackle the pandemic, like vaccinations, allowed businesses to ease restrictions and boost their payrolls. Stronger hiring is expected to lower unemployment from 6.2% in February which was the lowest in nearly a year. Markets could take days to respond to today’s jobs report given that Wall Street is closed Friday while Europe will be on holiday through Monday.


Canada’s dollar reached a 10-day high overnight in holiday-subdued trade. The loonie caught a boost this from better than expected news on the Canadian economy to begin the year and oil’s nearly 4% jump Thursday to above $61, a lift that came despite OPEC and its allies agreeing to gradually boost oil production in the months ahead.


Sterling didn’t move far in holiday-thinned trade but it moved enough to reach 10-day highs against the greenback. Pound positives were evident this week in fourth quarter growth exceeding forecasts (1.3% vs. 1%), while factory growth enjoyed an unexpected upgrade for the month of March.


The euro favored highs for the week against the greenback as the dollar index consolidated recent gains after logging first quarter appreciation of 3.6%, the most since 2018. Europe going on extended lockdown to tackle the virus hasn’t helped the euro. Yet Europe’s economy has shown somewhat surprising resilience which has helped to slow the single currency’s descent. A bigger than expected rise in euro zone economic sentiment in March climbed above the long term average for the first time in a year.


Given scant market participation due to the Easter holiday, the dollar didn’t move much in the wake of the strongest U.S. jobs report since last summer. America netted a forecast-smashing 916,000 jobs in March, the most since August, which far eclipsed forecasts of 650,000, and pushed unemployment down to 6%, a one-year low, from 6.2%. Job growth in January and February got revised higher by a combined 156,000. The hiring explosion showed the economy producing some of the “substantial further progress” the Fed wants to see before it pivots away from its low rate policies. Treasury yields may take exception with tepid wage growth which is consistent with inflation remaining subdued. The overall strength of the labor market is likely to prove dollar-positive.

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