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Currency Market Analysis

Jun 07, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar was broadly steady after its recent rally was halted by another month of tepid hiring. The dollar was little changed against the euro, sterling and Canadian dollar while the Mexican peso rallied 1% to three-week highs. The dollar last week had cruised to three-week highs as strong data on manufacturing and services growth suggested the Fed may need to move sooner to scale back its aggressive economic support. But hopes of the Fed tapering stimulus sooner were dashed by news the U.S. economy added nearly 560,000 jobs in May, a modest amount nearly 100K fewer than forecast. The dollar stabilized though at the outset of a week that features central bank policy decisions in Canada and the euro zone, and influential U.S. data Thursday on consumer inflation and weekly jobless claims that are forecast to build on recent gains.


The UK pound was mostly steady ahead of key domestic event risk later in the week. Britain Friday issues a trio of April reports on growth, industrial output and trade. Prints consistent with Britain’s economy accelerating after its worst year in centuries would tend to prove pound-positive. Forecasts call for quicker growth (2.2% vs 2.1%), slower factory activity (1.2% vs 1.8%), and a wider trade deficit (-12.1 bln vs -11.7 bln).


Canada’s dollar started the new week on steady ground as oil eased off fresh multiyear highs of $70. The loonie could keep to a range ahead of the Bank of Canada’s policy announcement Wednesday at 10 a.m. ET. No changes to interest rates are expected before the second half of 2022. Markets will be all ears to see whether Ottawa looks through back to back months of job market weakness and maintains its bullish outlook for the economy this year.


The euro played the middle of a narrow range against the greenback as it steadied about a cent below recent 4 ½ month highs. The euro largely shrugged off news of an unexpected 0.2% decline in German industrial orders in April which wrongfooted forecasts of a 1.5% increase. Next up for the euro: Germany’s ZEW survey of investor confidence on Tuesday and the week’s marquee event Thursday when the ECB issues a policy decision. Any hint that the ECB could taper stimulus this year would tend to be euro positive. 

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