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Currency Market Analysis

Sep 07, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar shook off its jobs-inpsired losses as Treasury yields pushed higher. Broad gains helped the greenback recover from multiweek lows versus the euro, sterling and Canadian dollar. The dollar tumbled to one-month lows last week after the weakest hiring in seven months cast doubt on the Fed rolling back stimulus anytime soon. America netted just 235,000 jobs in August, the fewest since January, which undershot forecasts by about 500,000. While disappointing, the latest snapshot of the labor market wasn’t all bad as higher wages were inflationary, and unemployment improved to a fresh pandemic low of 5.2%. Still, silvering linings in the employment picture such as weekly jobless claims on an improving path suggest an elevated risk of the Fed cutting back on stimulus. The yield on America’s 10-year Treasury was last at 1.36% compared to below 1.30% before last week’s payrolls report.


A big week for Canada started with the nation’s currency on its back foot and below recent three-week peaks versus its southern counterpart. A firmer greenback contributed to oil sliding around 2% to below $68. The loonie faces event risk this week in a midweek Bank of Canada policy decision, and Friday’s monthly snapshot on the job market. Local hiring likely increased by 100,000 jobs in August, compared to July’s increase of 94,000, a solid amount seen lowering unemployment to 7.3% from 7.5%. No big changes are expected from the BOC Wednesday ahead of the federal election on Sept. 20.


Sterling edged back from more than three-week highs against its U.S. counterpart. The pound also found a headwind from weaker broader markets with European stocks down and oil prices slipping around 2% to below $68. Britain issues a trio of economic reports Friday on monthly growth, seen decelerating, industrial output and trade. How the numbers fare will help shape expectations for the Bank of England on Sept. 23.


The euro surrendered some ground as the greenback rebounded and caution descended ahead of an ECB policy meeting this week. The softer euro was also a sign that the ECB may not strike a hawkish tone that some expect in the wake of area inflation soaring to 3%, the highest in a decade. The ECB will render its decision Thursday at 7:45 a.m. ET followed by an 8:30 a.m. news conference from President Christine Lagarde. 

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