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Currency Market Analysis

Jul 06, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar held firm and within reach of three-month highs, though support Tuesday mostly stemmed from a weaker euro. The euro slipped toward three-month lows after underwhelming data from the bloc’s biggest economy. Sterling was little changed while Canada’s dollar softened despite oil climbing to six-year peaks above $76. Elsewhere, the Aussie and kiwi dollar rose on expectations for central banks Down Under to reduce stimulus. While firmer, the buck’s rally lost some zip after Friday’s U.S. jobs report suggested the Fed was in no hurry to dial down on stimulus. The world’s biggest economy netted a robust 850,000 jobs in June, but unemployment ticked higher and wage growth stopped short of expectations. The buck this week will look to U.S. services growth Tuesday, the release of the minutes from the Fed’s hawkish mid-June meeting Wednesday, and weekly jobless claims Thursday.

EUR

The euro slipped toward three-month lows after disappointing data from Germany. German investor optimism moderated more than expected in July while industrial orders unexpectedly contracted in May. The data galvanized expectations for the ECB to lag behind its major counterparts in normalizing monetary policy.

GBP

The UK pound rose above mid-April lows against its U.S. rival following last week’s mixed jobs report from across the Atlantic. Sterling outperformance against the euro Tuesday translated into broad support. Recent headwinds on the pound diminished after data Monday showed Britain’s economy-driving services sector grew faster than previously expected in June. The data comes ahead of data Friday that’s forecast to show the UK economy slowed in May. 

CAD

The loonie edged off one-week highs in thin summer trade. Canada’s commodity-backed currency was underpinned by oil’s climb above $76, the highest level since late 2014. The loonie may keep to a range ahead of data Friday that’s forecast to show Canadian employers added jobs for the first time in three months in June, with hiring pegged at around 195,000 jobs which is seen lower unemployment to 7.7% from 8.2%.


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