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Currency Market Analysis

Apr 27, 2021 | Currency Market Analysis

Global Themes

The greenback treaded water above multiweek lows as Fed officials embarked on a two-day meeting. The buck was little changed against the euro, sterling and Canadian dollar. The Fed isn’t expected to set off any fireworks when it issues a statement Wednesday at 2 p.m. ET. America’s central bank is expected to keep borrowing rates and its buy buying program unchanged. A Fed that reassures that it will keep lending rates low could keep Treasury yields and the dollar anchored. However, with the U.S. economy seemingly in the early stages of its biggest boom in decades, a more upbeat sounding Fed could be a sign that it’s edging closer to tapering some of its emergency stimulus measures, a scenario that could boost both yields and the greenback. Ahead of the Fed’s decision tomorrow, U.S. consumer confidence today is forecast to rise from already one-year highs.


Sterling was little changed and played the middle of its range against the dollar in cautious, pre-Fed trade. The pound holds the upper hand so far this week against the dollar, helped by more evidence of a strengthening U.K. economy. A gauge of British consumer spending unexpectedly grew in April as the economy reopened from its third lockdown to help beat the pandemic. The next two weeks loom large for sterling as the Bank of England issues a decision on May 6, followed by Britain’s Q1 report card on May 12.


The euro steadied just beneath two-month highs as caution prevailed on the eve of a Fed policy announcement. EUR/USD has appreciated by 3% this month as the Fed has repeatedly said that policy would remain accommodative to help the millions of Americans that remain out of work due to the pandemic. After the Fed’s midweek decision, attention will shift to economic fundamentals with first quarter growth due from the U.S. Thursday, and Europe on Friday. 


Canada’s dollar steadied near six-week peaks against the dollar. The Canadian unit has flirted with recent February 2018 highs, boosted by Canada serving as a leading engine of global growth. Strengthening domestic fundamentals, coupled with rallying commodities like copper and iron ore, have the loonie within arm’s reach of recent multiyear highs. USD/CAD would be vulnerable to dovish policy guidance from the Fed Wednesday which would stand in stark contrast to the more hawkish Bank of Canada.  

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