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Currency Market Analysis

Sep 01, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar waded into September by mostly treading water as it sought direction from key data over the coming days. The buck was steady to stronger versus Europe and Japan, while commodity currencies like the Canadian dollar shadowed risk appetite and stronger oil around $69 higher. The buck has been in a funk of late after the Fed chair last week offered a tepid signal that it could taper stimulus this year. To help shed more light on the near-term outlook for Fed policy, investors will parse key U.S. numbers today on private sector hiring and manufacturing growth. Prints consistent with the world’s biggest economy generally weathering rising coronavirus cases would bolster the case for the Fed to scale back stimulus sooner rather than later. The big number arrives with Friday’s August employment report, the last major look at the job market before the Fed’s Sept. 22 decision.  


Sterling edged toward two-week highs against the greenback after Delta appeared to rear its head in the latest U.S. job figures. Sterling capitalized on the dollar’s fall after ADP hiring showed private sector hiring increased by a lackluster 374,000 in August, falling far short of forecasts of 613,000. Softer data suggests the Fed may move later rather than sooner to rollback stimulus that has weighed on the greenback.


The euro kept firm around early August peaks ahead fresh readings on the U.S. economy. The euro closed out August with a tailwind after euro zone inflation burst to 10-year highs of 3%, making the coming meeting of the ECB on Sept. 9 much more interesting. While the euro has fared better of late, it’s still dogged by the perception that the ECB will lag far behind the Fed in reducing stimulus.


The U.S. dollar tripped after disappointing jobs data validated the Fed’s cautious approach to rolling back stimulus. Payrolls company ADP said private employers added 374,000 jobs in August, above a revised increase of 326,000 in July, but far short of forecasts of 613,000. The data added more evidence to suggest that the Delta strain of the virus was bleeding into the economic recovery. Delta was credited with knocking U.S. consumer confidence to 6-month lows last month. Nonfarm payrolls on Friday, if disappointing, would risk another leg lower for the dollar as it would seemingly close the door to an imminent tapering in Fed policy.


The loonie jumped into September as it neared recent peaks against the greenback. Canada’s dollar weakened for a third time in as many months in August when it momentarily tumbled to lows for the year. Canada added to global growth worries as its economy unexpectedly contracted during the spring quarter. But the greenback has struggled to sustain gains amid a still hazy outlook for the Fed to dial back on stimulus.

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