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Currency Market Analysis

Apr 16, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar was poised for a second straight losing week, weighed down by a sharp slide in Treasury yields. The buck was pinned at session lows against the euro, sterling and Canadian dollar. While America’s recovery continues to cruise along and gain momentum, the dollar has struggled on the belief that it would take many months of strong data to get the Fed to change course. Consumers, the driver of the world’ biggest economy, stepped up spending by nearly 10% in March, the fastest in 10 months. Weekly jobless claims sank below 600,000 to the lowest level in more than a year. Yet jobless claims remain far above healthy levels below 250,000 which is why the market firmly believes that the Fed won’t raise interest rates over the foreseeable future. The greenback also has been held hostage to Treasury yields. The 10-year note Thursday staged its biggest daily drop since November, eroding the dollar’s allure.

EUR

The euro was perched at six-week highs against the greenback and just below major resistance. A break above resistance would be a bullish sign for the single currency’s revival after it hit five-month lows in late March. With the euro carrying a stronger bias into next week’s ECB policy decision on April 22, it could elicit some jawboning from central bankers who consider its underlying strength an obstacle to lifting inflation toward their near 2% goal.

GBP

A firm U.K. pound was on track for its second weekly gain against the dollar in three weeks. While sterling has wavered this week, the risk sensitive currency ultimately found support from stocks rallying to all-time highs, and the greenback’s underperformance due to sinking Treasury yields. The British consumer looms large next week for the pound with consumer prices due Wednesday followed by retail sales Friday. Forecasts call for slightly higher inflation while consumers likely spent for a second straight month.

CAD

A stronger loonie kept around 3 ½ week peaks against the greenback, boosted by oil’s climb to four-week highs above $63. Signs of a strengthen world economy in the wake of bullish data from the U.S. and China, the globe’s biggest economies, were also supportive of growth-reliant currencies like the loonie and its commodity siblings from Australia and New Zealand. The loonie totes a firm bias into next week when the Liberal government Monday issues its first budget in years, and the Bank of Canada renders a midweek policy decision.


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