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Currency Market Analysis

Jun 09, 2021 | Currency Market Analysis

Global Themes

The calm before important U.S. data and an ECB meeting Thursday saw the U.S. dollar drift south. The greenback declined against the euro, sterling and Canadian dollar as it largely tracked Treasury yields lower. The yield on America’s benchmark 10-year Treasury note slipped below 1.50%, the lowest level in a month. The dollar is struggling on the view that U.S. inflation data tomorrow is likely to rise to but not to a level that alters the perception of the Fed remaining among the world’s most dovish central banks. Forecasts call for America’s consumer price index to rise at a 4.7% annual rate in May after April’s 4.2% jump which was the highest since 2008. Ahead of the ECB tomorrow, the Bank of Canada today at 10 a.m. ET will issue a policy statement when it is all but certain to keep borrowing costs at record lows of 0.25%.


Sterling was little changed Wednesday with upside capped by doubts about whether Britain will go ahead with plans to fully reopen its economy on Jun 21. A rise in a variant of the coronavirus has some officials urging the government to delay reopening, a scenario that would threaten to slow recovery momentum. And how the UK economy is holding up so far will be gleaned by Friday numbers on economic growth and manufacturing.


The euro rose toward the top of its range against the dollar, keeping it near recent January highs. The ECB holds a key to the euro’s coming prospects as the central bank of 19 countries issues an important policy decision tomorrow. No policy changes are expected but an acknowledgement of the bloc’s economy making concrete progress toward recovery would strike a less dovish tone that could buoy the euro.


The loonie enjoyed an oil-inspired bounce ahead of a Bank of Canada policy meeting. Oil edged higher after closing above $70 this week for the first time since 2018. The BOC at 10 a.m. ET will issue a statement that’s expected to maintain record low rates of 0.25%. Key for the loonie will be whether the BOC will emphasize caution over the outlook after the economy shed jobs in April and May. The central bank could rein in its hawkish tone, not wanting to spur further loonie appreciation which has gained more than 3% since its last meeting and jumped to 6-year highs, a development that could undermine export growth.

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