Currency Market Analysis

Aug 16, 2021 | Currency Market Analysis

Global Themes

Safe haven currencies were in the driver’s seat Monday, boosting the likes of units from the U.S., Japan and Switzerland. The buck was flat to firmer against the UK pound and euro, though the U.S. currency slipped versus the yen and Swiss franc. Elsewhere, commodity currencies like the Canadian dollar and emerging markets underperformned. Demand for safety grew after disappointing data from China added to concerns about sluggishness in the world’s No. 2 economy. Meanwhile, the crisis in Afghanistan added to markets’ more defensive bias, a day after the government collapsed and the Taliban seized control. With safer bets in vogue, it helped the greenback rebound from one-week lows which came after data Friday showed U.S. consumer morale plunged to late 2011 lows. Geopolitical factors are likely to dictate market sentiment this week, along with news on U.S. and Canadian retail spending, and inflation data from Europe and Canada. 

GBP

Sterling was mostly stationary ahead of central bank-impacting data this week. UK unemployment Tuesday is forecast to remain at 4.8%, while inflation is seen slowing a couple ticks to 2.3%. Retail spending Friday is forecast to rise for a second straight month, and by a solid 0.4% for July. Constructive results would tend to underpin the pound but that may be contingent on how the coming days and weeks play out in Afghanistan, a deteriorating situation that has whet appetite for safer plays like the greenback.

EUR

The euro slipped from one-week highs as risk aversion returned and steered skittish investors toward higher ground in the dollar, yen and swissie. The euro had enjoyed a tentative reprieve above four-month lows after data Friday showed a shock plunge in U.S. consumer sentiment. European fundamentals will be important for the euro this week, with data Tuesday on second quarter growth and Wednesday’s reading of inflation.

CAD

The loonie slipped to its lowest level in nearly a week following fresh signs of a moderating Chinese economy. Factory growth and retail sales in the world’s second-biggest economy disappointed, weighing on commodity currencies that have close economic ties to China. Losses for the Canadian dollar have so far proven relatively limited ahead of domestic data this week that are expected to be consistent with a rebounding economy. Canadian consumer prices likely accelerated at a 3.4% clip in July, while a surge of more than 4% in retail sales is forecast for the Friday survey. Oil fell around 3% to below $67.


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.