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Currency Market Analysis

Jun 08, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar stabilized after a jobs report-induced declined from multiweek highs. Broad gains Tuesday supported the dollar against peers from Europe and Canada. Currencies maintained tight ranges ahead of central bank meetings and U.S. inflation data Thursday that could serve as a prelude to next week’s Fed meeting. The Bank of Canada Wednesday is expected to maintain record low interest rates of 0.25% after the country’s job market bled workers for a second straight month. The ECB on Thursday is also expected to keep in place super accommodative policies in the wake of German data this week that showed surprise declines in factory growth and investor morale. The market is bracing for American consumer inflation Thursday that’s forecast to accelerate to fresh multiyear highs, news that if realized could pull forward market expectations for the Fed to taper stimulus.


Surprisingly weak German data pushed the euro lower against the greenback. Germany’s ZEW survey of investor confidence unexpectedly weakened below 80 in June, compared to forecasts of a rise from the previous month’s 84.4. The data followed reports this week on German factory growth that unexpectedly contracted, signs of a moderating pace of recovery from the pandemic. 


The loonie shifted into neutral ahead of a local central bank decision Wednesday and critical U.S. inflation Thursday. Consequently, the local dollar treaded water about a penny below recent six-year highs against its U.S. counterpart. Key for the loonie’s coming prospects will be whether Ottawa emphasizes or downplays recent job market weakness. Central bankers that sound cautiously optimistic could help the loonie maintain its bullish bias. 


A firmer greenback, coupled with subdued global equities, weighed on the UK pound. Sterling kept to recent ranges ahead of a double dose of transatlantic event risks Thursday in the ECB and U.S. inflation data. UK risk events follow Friday with numbers on growth, factory activity and trade that could serve as a primer of what to expect from the Bank of England’s next policy announcement on Jun 24.

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