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Currency Market Analysis

May 03, 2021 | Currency Market Analysis

Global Themes

The US dollar resumed its down-trend vs major currencies after Friday’s month-end flows sent it higher. Better economic data abroad, lower new covid cases, and good risk appetite from investors, have seen the dollar fall since the end of Q1. The dollar fell by 2.8% in the month of April as measured by the US Dollar Index. Lower US bond yields have also pushed the currency lower. US 10-year Treasuries peaked on March 30th at 1.77% and have traded as low as 1.52% since. A very dovish Federal Open Market Committee last Wednesday also helped the dollar remain weak on foreign exchange markets.

EUR

Despite the news that the common currency zone had fallen into a double-dip recession in the first quarter, the Euro traded as high as 1.2150 last week, a two-month high. The Eurozone got more support this morning from the IHS Markit Manufacturing Purchasing Managers Index (PMI) for April which showed its highest-ever reading in the series of the survey going back to 1997 at 62.9 vs 62.5 in March. Germany also reported solid Retail Sales in March surging 7.7% on top of February’s 2.7% rise.

CAD

Solid Gross Domestic Product (GDP) reports for February, March, and Q1 reported last Friday sent the Canadian dollar to 81.53 US-cents, a fresh 3-year high last Friday. This week the Canadian dollar will key off today’s Manufacturing PMI Report for April, Tuesday’s Merchandise Trade Report for March, and Friday’s Employment Report for April. Due to the 3rd Covid wave that hit Canada in April, much of the solid job gains in March are expected to be lost in April. The market will likely see this as a temporary setback. 

GBP

The British Pound has struggled to recapture the 3-year high of 1.4235 is made in late February despite its record on pushing new Covid cases to near zero. The Bank of England makes their decision on monetary policy this Thursday and will no doubt provide fresh direction for the Pound.


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