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Currency Market Analysis

Jun 03, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar firmed ahead of influential American jobs data over the balance of the week. The buck rose against the euro and kept above multiyear lows against rivals from the UK and Canada. A run of strong U.S. data has helped to slow the anti-dollar trade that has gained traction this quarter. Moreover, key labor market data today and tomorrow could help shape the tenor of the Fed’s mid-month meeting. The dollar hovered near session highs after payrolls company ADP reported that private employers added nearly a million jobs last month, far above forecasts of 650,000. Also in focus today is the weekly reading of jobless claims that are forecast to remain on an improving path. The week culminates Friday with the May nonfarm payrolls report.


A softer UK pound was about a cent beneath the April 2018 highs it clocked earlier this week. Scope for pound weakness could prove relatively limited after a report on British services growth, a leading economic driver, enjoyed a surprise upgrade to 62.9 in May, the highest in 24 years, the latest evidence of the economy recovering after its worst year in centuries.


The greenback maintained a data-inspired recovery following a double shot of good news on the job market. ADP reported that private employers added a forecast-beating 978,000 jobs in May. Another survey showed that weekly jobless claims dropped to new pandemic lows of 385,000. Taken together, the data point to a bounce back for Friday’s all-important report on May nonfarm payrolls. May hiring likely increased by around 650,000 after April’s lackluster gain of 266,000. An upside surprise may be needed to help sustain the dollar’s recovery.  


The euro kept towards lows for the week against the greenback. Dollar bears are treading carefully as signs of a robust U.S. recovery could lead the Fed to commence policy tapering somewhat sooner than expected. The euro appears to be consolidating and seeking a fresh catalyst after its bounce to more than four-month highs last week.


The loonie slipped from 6-year highs against a stabilizing greenback. USD/CAD took aim at key resistance which if breached could allow for further stabilization. Economic data from both sides of the border Friday will offer directional cues for the currency pair. U.S. hiring is forecast to accelerate after an April slowdown while Canadian job growth is expected to contract, albeit at a slower pace of 20,000 after a loss of more than 200,000 in April, for a second straight month.

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