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Currency Market Analysis

Jul 07, 2021 | Currency Market Analysis

Global Themes

The buck was on a mixed footing ahead of key news today from the Federal Reserve. Ahead of today’s release of the minutes from the Fed’s June meeting, the U.S. dollar eased off a range of April highs against the euro, sterling and Canadian dollar. The dollar has been on a roll since the Fed last month upgraded its outlook for the world’s biggest economy, and flagged an earlier liftoff in interest rates. The Fed minutes, which drop at 2 p.m. ET, may shed light on the extent to which the Fed has turned hawkish. Minutes that strengthen the case for the Fed to taper its bond buying program as soon as this year could catalyze another wave of dollar buying. The dollar also has benefited as doubts surface about the strength of the global recovery from the pandemic following weaker than expected data from around the world.


The euro was anchored near three-month lows against its U.S. counterpart following more evidence of a moderating German economy. A day after German investor confidence waned and area industrial orders contracted, data Wednesday showed that German industrial output unexpectedly fell 0.3% in May. Europe’s biggest economy remains on the road to recovery but weaker data suggests a longer recuperation period to full health.  


Canada’s dollar stabilized after it skid around 1% Tuesday for one of its worst days in months. The loonie plunged Tuesday to 2 ½ month lows as oil tumbled from an intraday high of nearly $77, its strongest in six years, only to close below $74. The loonie has fallen prey to oil market volatility and uncertainty over whether OPEC will boost supply to meet rising demand. A rebound in hiring and lower unemployment are in the cards for Canada’s employment report Friday.


The UK pound kept toward the bottom of its recent range against the greenback amid wavering risk sentiment that offered underlying support to safer bets like the greenback. Skepticism is on the rise about the strength of the global economy over the latter half of the year following subpar data from around the world. Recovery uncertainty is seen as a vote of confidence in the Bank of England’s still dovish policy  outlook, a factor behind the pound’s recent underperformance.

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