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Currency Market Analysis

Aug 30, 2021 | Currency Market Analysis

Global Themes

The forex market was fairly quiet Monday with the world’s largest trading center, London, enjoying a summer bank holiday. The dollar steadied above multiweek lows with the euro, sterling and Canadian dollar keeping towards the upper end of recent ranges. The dollar lost ground after the Fed chief last week surprised no one by signaling America’s central bank could start to reduce stimulus by the end of the year. Some market participants had braced for a more hawkish message from Jerome Powell with unemployment trending lower and core inflation running at the hottest level in 30 years. To help fine tune expectations for when the Fed will start reduce its monthly bond purchases, which aim to hold down long-term lending rates, investors will dissect America’s monthly jobs report on Friday. August nonfarm payrolls are forecast to rise by 750,00 after July’s surge of 943,000.


The euro held firm at three-week highs in holiday-muted trade. The UK market, the world’s biggest FX hub, is observing a summer bank holiday. Big numbers from Europe this week will help to shed light on whether the euro’s recent rally has legs. The key euro zone numbers to watch are inflation, seen accelerating at a 2.8% annual rate in August from 2.2% in July, and unemployment which is forecast to tick down to a still-elevated 7.6% in July from 7.7% in June. For August, EUR/USD is down more than 0.5%.


Sterling hovered around its highest level in more than a week against the greenback. While off its lows, the pound remained on its back foot for the month with GBP/USD down around 1%. Britain issues final manufacturing numbers for August on Wednesday which are forecast to extend a recent downtrend.


USD/CAD kept to the range, albeit the bottom end, as the Canadian dollar found support from higher oil with prices climbing to three-week highs near $69. Also helping the loonie find its legs is the view that while the Fed could taper its monthly bond purchases by year-end, much will hinge on the U.S. economy’s performance. America issues lots of data this week with the main focus on the August jobs report Friday. U.S. unemployment is forecast to improve to a new pandemic low of 5.2% from 5.4%. USD/CAD is currently up about 1% for August.

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