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Currency Market Analysis

Apr 29, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar stabilized but kept around its lowest orbit in months, a day after the Federal Reserve reaffirmed its unwavering commitment to dovish interest rate policy. The buck steadied after a Fed-induced fall to one-week lows against sterling, its lowest in two months versus the euro, and its weakest in three years against the high-flying Canadian dollar. Dollar shunning abated ahead of data today that’s expected to show the U.S. economy got off to a blistering start to the year while jobless claims are forecast to spend a third week in a row below 600,000. The world’s biggest economy likely grew at a sizzling annualized rate of more than 6% during the first quarter. Dollar sentiment was dealt a fresh setback after the Fed maintained a high bar to changing course and demanded the economy make ‘substantial further progress.’

GBP

Sterling climbed to its highest in more than a week against the Fed-weakened dollar. Improved risk sentiment with most global stocks higher added to the pound’s firmer bias. Still, the UK unit kept to recent ranges given that recovery optimism has at least been partially baked in to its price. The Bank of England will headline a holiday-shortened coming week for Britain.

CAD

The G-10 star Canadian dollar is shining brighter, courtesy of divergent central bank policy between the more hawkish Bank of Canada and the resolutely dovish Federal Reserve. Canada last week further tapered its bond buying program, a step the Fed still isn’t considering yet as it demands that the U.S. economy make ‘substantial further progress’ before pulling back on economic support. Buoyant commodities and evidence of a consumer-led recovery in Canada validated the loonie’s surge to February 2018 highs against the greenback.

EUR

The euro rolled to two-month highs a day after the Fed reaffirmed a low interest rate stance for the foreseeable future. Meanwhile, signs of an improving European economy added traction to the euro’s advance. Euro zone economic sentiment brightened more than expected to 110.3 in April, a nearly 10-point improvement from the previous month. The stronger euro faces a test of strength in European first quarter growth numbers on Friday.


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