Western Union Business Solution is rebranding into CONVERA Read more >

Currency Market Analysis

Jun 10, 2021 | Currency Market Analysis

Global Themes

The greenback and its chief peers steadied ahead of a trio of event risks that could help guide near-term sentiment. The dollar was largely flat against the euro, sterling and Canadian dollar with players sidelined ahead U.S. inflation and jobs data, and an ECB policy decision. The prevailing view that higher U.S. inflation would ultimately prove temporary has undercut bouts of U.S. dollar outperformance. America today issues its May consumer price index that’s forecast to show inflation jumped at an annual rate of 4.7% after a 4.2% spike in April, the highest since 2008. A print in line or lower than expected would allay inflation fears and likely keep Treasury yields and the dollar anchored. An upside surprise, on the other hand, could unleash worries about persistently higher inflation, an outcome that could push yields and the dollar higher.


Domestic headwinds weighed on sterling which flirted with four-week lows against the greenback. Clouds are forming over Britain’s economic outlook as worries over the health situation have raised doubts about whether the UK government would be able to fully reopen its economy as planned on Jun 21. Meanwhile, Brexit tensions have resurfaced amid a trade dispute between the UK and EU over Northern Ireland. Brexit uncertainty has long been a vulnerability for the UK currency.


Canada’s dollar firmed a day after the Bank of Canada left monetary policy steady and flagged an economy that was poised to ‘rebound strongly’ in the months ahead. Oil holding around $70, the highest since October 2018, allowed the loonie to stick close to recent 6-year peaks. Ottawa’s bullish outlook for growth has it on track to further dial back on stimulus over coming months, a more hawkish outlook that contrasts the more dovish Fed.   


The euro was broadly steady as markets absorbed the latest policy update from the ECB. As expected, the 19-country central bank left interest rates at rock bottom levels and its other economic support measures on full blast to help sustain an nascent rebound. The ECB upgraded its outlook for growth, with 2021 GDP seen up 4.6% compared to its previous forecast of 4.0%. As for risks facing the economy, the ECB characterized them as ‘broadly balanced.’


The U.S. dollar was lukewarm despite data showing inflation running hotter than expected last month. Consumer prices jumped at a 5.0% annual rate in May, the highest since August 2008 and above forecasts of 4.7%. While inflation pushed higher, the labor market improved as weekly jobless claims declined to a new pandemic low of 376,000 which was close to forecasts of 370,000. Hotter than expected inflation will make for a lively debate about whether higher prices will ultimately prove transitory. For now, the market is giving the transitory view the benefit of the doubt.

Get the daily currency market analysis in your Inbox

Published five days a week, this newsletter provides day-to-day trends and activities affecting the market in easy-to-understand snapshots.