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Currency Market Analysis

Apr 12, 2021 | Currency Market Analysis

Global Themes

A lid remained on U.S. yields and dollar Monday but that could change in a busy week for the world’s biggest economy. The dollar slipped against the euro, yen, and sterling but was little changed against the Canadian dollar. The dollar maintained a softer bias after it logged its worst week of the year when it depreciated by nearly 1%. Mixed data and Treasury yields keeping below recent peaks have checked the dollar’s recent gains. The yield on the 10-year Treasury remained muted around 1.66%, below a late March high of 1.77%. Lower yields are a sign of market conviction in the Fed not changing course on policy anytime soon. Among this week’s important readings on the economy are consumer inflation Tuesday and retail spending Thursday. For the dollar to snap out of its relative funk, it would help if the data are consistent with an economy starting to boom. 


The euro kept toward the upper end of its range against the greenback, its strongest level in nearly three weeks. In the global vaccine race, Europe appears to be gaining ground which is easing pressure on the single currency. Moreover, signs of a resilient European economy are also translating into support for the euro. Euro zone retail sales jumped by 3% in February, a print two times stronger than forecast of a 1.5% increase.


Sterling rebounded after sinking overnight to two-month lows against the greenback. The pound found support from parts of the British economy reopening after a long winter in lockdown mode. Attention also turned to Tuesday data that’s forecast to show the U.K. economy accelerated at a 0.6% pace in February after it contracted by nearly 3% to kick off 2021.


The loonie pared some of Friday’s job-driven gains with higher oil keeping the Canadian currency near recent peaks. In the latest sign of a resilient economy, data Friday showed that employers netted more than 300,000 jobs in March, the most in six months, which helped to drive unemployment down to a pre-pandemic low of 7.5%. While the data strengthened the case for the Bank of Canada to reduce monetary support to the economy, the short run has been clouded by a surge in Covid-19 infections. Oil jumped by a percent to above $60.

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