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Currency Market Analysis

Apr 07, 2021 | Currency Market Analysis

Global Themes

A mostly subdued U.S. dollar fell to two-week lows ahead of today’s release of the minutes from the last Fed meeting. The euro notched a two-week peak. The dollar was little changed against the yen and sterling, while it climbed to one-week highs against the Canadian dollar. The dollar has corrected lower over the opening week of the second quarter, a decline partially inspired by lower Treasury yields, with the 10-year around 1.65%, well below recent peaks of 1.77%. Blockbuster data and lower yields suggest the market is convinced that the Fed won’t raise interest rates for a very long time. Just how long may be gleaned from today’s 2 p.m. ET release of the minutes from the Fed’s mid-March meeting. Any hawkish surprise in the minutes could help the dollar strengthen anew, a scenario that could bolster prospects of an earlier rate rise.


Canada’s dollar fell to one-week lows as worrisome coronavirus developments overshadowed more evidence of a strengthening economy. Canadian Prime Minister Justin Trudeau acknowledged that the nation is battling a third wave of the pandemic that’s led to a spike in hospitalizations. Virus fears eclipsed news that Canada logged a second straight monthly trade surplus for the first time in years in February, the latest evidence to suggest first quarter growth would be solid.


Declines against the euro led the pound to lose ground against the U.S. dollar. Like the buck, sterling has encountered some profit-taking after a solid first quarter performance when it logged its best quarterly gain against the euro in years. A modest downward revision to British services growth in March contributed to the pound’s weaker tone.


The euro rose to two-week highs against the dollar, as it consolidated declines to arguably oversold levels against both the dollar and sterling. The euro has clawed back nearly 2 cents, or 1.6%, from the five-month lows it plumbed a week ago against the greenback. While firmer, the euro would need to push above key resistance to help it maintain momentum.

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