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Currency Market Analysis

Jun 28, 2021 | Currency Market Analysis

Global Themes

Broad gains Monday lifted the greenback to nearly one-week highs. The mostly stronger dollar firmed against the euro and Canadian dollar, while the UK pound was little changed. Wall Street was poised for a cautious start to the week ahead of key U.S. economic data that could shed light on the outlook for Fed policy. The dollar index shed 0.5% last week as it consolidated recent gains. The dollar overall remains in a higher orbit since the Fed earlier this month penciled in two rate hikes for 2023. Big U.S. numbers to watch this week are consumer confidence Tuesday, the ISM manufacturing index on Thursday, and the week’s main event: Nonfarm payrolls Friday. An improving job market is seen as a prerequisite for the Fed to dial back on dollar-negative stimulus. Forecasts call for faster hiring (690K vs 559K in May) and lower unemployment (5.7% vs 5.8%). 


The euro slipped as investors readied for key jobs data this week from both sides of the Atlantic. The euro zone Thursday issues unemployment which is forecast to steady at an elevated 8% in May. And while U.S. unemployment is also expected to remain elevated, it’s forecast to tick down to 5.7%. Outcomes consistent with the Fed tapering stimulus before the ECB could stiffen a headwind on EUR/USD.


Sterling rose after a top UK official voiced support for an earlier rollback of Covid-19 restrictions. Britain is already on track to reopen its economy next month. An earlier than expected reopening could set the stage for faster growth over the latter half of the year. Britain this week releases final numbers on first quarter growth Wednesday and factory activity Thursday. Forecasts call for GDP to confirm the economy contracted 1.5% in the January-March quarter.


The loonie started the week on its back foot as the greenback ticked higher ahead of key data, while oil markets ebbed from fresh October 2018 highs above $74. The loonie is bracing for Canadian growth for April on Wednesday that is expected to show the economy contracted 0.8% after it grew more than 1% in March. Canada’s economy encountered speed bumps in the spring as it contended with a strong  third wave of the virus. 

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