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Currency Market Analysis

Apr 23, 2021 | Currency Market Analysis

Global Themes

Strong data from Europe and lower Treasury yields proved a recipe for a weaker greenback. The dollar was on track for its third fall in as many weeks with across the board declines. Mostly stronger than expected numbers on European factory and services growth were consistent with an economic revival in the spring after an anticipated first quarter contraction. British consumers, meanwhile, went on spending spree as retail sales soared more than 5% in March. In the U.S., the yield on the 10-year Treasury bond slipped below 1.55% ahead of next week’s Fed meeting. America’s central bank on April 28 is likely to reiterate a low rate message to help the millions that remain unemployed due to the pandemic.


The loonie rose toward one-month highs as the greenback wilted and oil prices regained some composure. Treasury yields remained anchored ahead of an April 28 Fed decision whose message could sound more like the dovish ECB than the hawkish Bank of Canada. Crude prices firmed above $61, buoying commodity-backed currencies. Canada’s fundamental sights next week are set to retail sales on Wednesday and February growth on Friday.  


The euro returned to seven-week highs against the greenback after bullish data validated the ECB’s nascent optimism in the bloc’s economy. The euro fell Thursday after the ECB noted signs of green economic shoots sprouting but was tight-lipped on scaling back its emergency support anytime soon. Data today on euro zone manufacturing and services activity surprised to the upside, a clear sign of a spring revival after the economy likely contracted during the January-March quarter.


A trio of good news on the U.K. economy helped the pound snap out of a funk. British retail sales soared by 5.4% in March, a very encouraging sign as it came ahead of the country reopening its economy earlier this month. Factory and services growth also enjoyed faster than expected expansion during the month of April. Mostly improved risk sentiment Friday added to the pound’s stronger bias.

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