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Currency Market Analysis

Apr 15, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar grinded to new lows ahead of major news this morning on the world’s largest economy. The dollar skid to three-week lows against the yen and loonie, and hit four- and six-week lows against the Aussie dollar and euro, respectively. The Fed’s high bar to unwinding support to the economy has increasingly weighed on the buck while it’s helped risk assets, like Wall Street, gain a clear advantage. The trade-weighted dollar index hit four-week lows and will look to fresh news on the economy for its next cue. Forecasts call for fewer weekly jobless claims (700K vs last week’s 744K) and a sharp bounce back in March retail sales (5.9% vs -3% in February). Strong results that fail to push Treasury yields higher would tend to leave the dollar vulnerable. Ahead of the data the U.S. 10-year note slipped by two basis points to 1.61%.


Canada’s dollar strengthened to three-week highs, boosted by oil’s big bounce the previous day to four-week highs above $63, and the U.S. dollar’s struggle to rally in the face of exceedingly strong U.S. data. While the U.S. economy is increasingly showing substantial progress, the bar is still perceived as high for the Fed to change course from low rate policy, wanting to ensure the economy sticks on a sustainable path to a strong recovery.  


The U.K. pound hovered around one-week highs against the dollar despite a burst of strong indicators on the U.S. economy. Sterling tends to benefit from subdued U.S. Treasury yields which erode the greenback’s appeal.


The dollar stuck near four-week lows despite resoundingly strong news on the U.S. economy. Weekly jobless claims plunged to a new pandemic low of 576,000 in the latest period, compared to forecasts of 700,000 from the prior week’s 769,000. Retail sales soared by some 9.8% in March, above expectations of a nearly 6% gain. While the data cements expectations of strong first quarter growth, Treasury yields shrugged off the data with the 10-year sinking below 1.6%, the lowest in three weeks. While impressive, the data does little to lower the Fed’s high bar to changing course of highly accommodative policy.


The euro climbed to six-week highs against the dollar as it edged closer to a key psychological top. The euro has scratched together a rally as the Fed’s decidedly dovish bias overshadows resoundingly bullish U.S. data. Signs of Europe’s vaccination program gaining momentum also has translated into support for the single currency.

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