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Currency Market Analysis

Apr 14, 2021 | Currency Market Analysis

Global Themes

The Fed’s unwavering commitment to rock-bottom interest rates weighed further on the U.S. dollar which neared one-month lows against a basket of rivals. The generally subdued dollar slipped to one-week lows against sterling, and neared a one-month bottom against the euro. Treasury yields remaining lower for the week buoyed the rate sensitive yen. Canada’s dollar was little changed. Despite the U.S. economy displaying mounting signs of strength, the dollar has given back ground in April, a sign of the Fed’s commitment to low interest rates to help spur a strong and sustainable recovery from the pandemic-induced recession. Markets were unfazed by the biggest jump in U.S. inflation in years as the rise is expected to prove relatively short-lived. Sentiment remains fluid, though, with attention turning to U.S. import prices today, another gauge of inflation, and a raft of data Thursday, including weekly jobless claims and retail sales.


A choppy pound of late swung from two-month lows to one-week highs against its weaker U.S. counterpart. Sterling hit multimonth lows this week, partly on news that the Bank of England’s hawkish chief economist, Mr. Andy Haldane, would exit in the months ahead, potentially tipped the central bank in a dovish direction where the balance of policymakers favor pound-negative lower interest rates to spur a faster recovery.


The euro neared a one-month high against the dollar as it continued a march toward a key psychological level. The euro has capitalized on the dollar’s decline, and from signs that Europe has started to pickup the pace of vaccinations which is positive for the bloc’s recovery prospects. Meanwhile, today’s 1% drop in euro zone industrial production in February wasn’t quite as bad as forecast which helped the euro sustain its gain.


The loonie was a bit of an outlier Wednesday as it softened against the otherwise weaker greenback while rivals from Australia and New Zealand strengthened. A quieter week for the Canadian economy after last week’s stellar jobs report has limited fuel to drive the loonie. Caution is also on the rise for the C$ ahead of the next Bank of Canada policy decision on April 21. A 1% jump in oil to above $61 lifted crude to the highest level in more than a week.

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