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Currency Market Analysis

Oct 04, 2021 | Currency Market Analysis

Global Themes

The greenback’s surge to one-year highs cooled on caution and consolidation ahead of the week’s main economic event: U.S. nonfarm payrolls on Friday. The dollar fared mixed but mostly weaker as rivals from Europe and Canada strengthened, while emerging markets like the Mexican peso fell. The buck is on a four-week winning streak, its longest since June, as the Fed appears on track to reduce stimulus this year and embark on a rate hiking campaign next year. The dollar has enjoyed additional tailwinds from safety follows from retreating stocks and Treasury yields holding near multimonth highs. The week’s big event risk looms Friday when America issues its September jobs report. Forecasts call for faster hiring of 488,000 last month with unemployment expected to fall a tick to 5.1%. A print near or above of expectations could green light Fed policy tapering as soon as next month.


Canada’s dollar flirted with one-week highs as the greenback’s rally paused and oil prices held firm near $76. Jobs data Friday from both sides of the border will help set the tone this week for USD/CAD. Canadian hiring likely slowed to around 65,000 jobs in September with unemployment forecast to improve to 6.9% from 7.1%. Below the border, U.S. hiring likely accelerated to around 488,000 jobs, a strong amount that’s expected to lower unemployment to 5.1% from 5.2%.


Sterling neared a one-week high Monday as it steadied after a rout last week to nine-month lows against the greenback. The pound’s bounce faces a test Tuesday in the form of UK services data that’s forecast to confirm the economy’s leading growth engine lost further momentum in September. The pound has been dogged of late by worries about UK growth, losses that have been exacerbated by global markets turning more risk averse, an environment that’s stoked demand for safe bets like the greenback.  


The euro grinded above 14-month lows as the dollar consolidated a multiweek surge to one-year highs ahead of influential U.S. jobs data Friday. The euro could struggle to sustain gains if forecasts for German data this week prove accurate. Contraction is in the cards for factory surveys from Europe’s biggest economy on Wednesday (industrial orders) and Thursday (industrial output). Weak prints would keep the Fed on track to normalize monetary policy before its European counterpart.

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