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Currency Market Analysis

Oct 12, 2021 | Currency Market Analysis

Global Themes

The greenback was broadly steady as worries about global growth and inflation kept the safe haven unit well supported. The euro and yen were little changed, keeping the Japanese currency near three-year lows. Bullish UK jobs data boosted the UK pound, along with prospects for higher interest rates. Oil charging to seven-year highs above $80 translated into the strongest Canadian dollar in 10 weeks. While U.S. dollar strength has proven selective, it remains supported by wobbly stocks and worries about soaring oil prices exacerbating headwinds on the global recovery. Keeping the euro on the defensive and near lows for the year, a gauge of German economic sentiment deteriorated more than expected in October. The buck will seek direction from remarks today from the Fed’s No. 2 official, Richard Clarida who speaks at 11:15 a.m. ET, and Wednesday’s all-important reading on U.S. consumer prices.

CAD

Oil on a tear has game-changing potential for the Canadian dollar which hovered close to Monday’s 10-week high. Oil wavered after topping $80 in recent sessions, the highest in seven years. Adding to the loonie’s supportive cast, the domestic economy is showing concrete signs of rebounding after it unexpectedly went backwards in the spring. Robust hiring in September lower Canadian unemployment to 6.9%, the lowest in 18 months.

EUR

The euro languished near lows for the year after more downbeat news on Europe’s largest economy. Painting a dreary picture of area growth prospects, Germany’s influential ZEW survey of investor confidence declined to 22.3 in October, the lowest level of 2021, from 26.5 September which undershot forecasts of 24.0. Europe’s recovery from the pandemic has struggled to gain traction due mostly to supply chain bottlenecks.

GBP

Sterling remained on choppy, though mostly higher ground as constructive UK jobs data fit with the narrative of rising borrowing costs in the months ahead. British unemployment improved a tick to 4.5% in the three months to the end of August. Inflation trending higher, coupled with a healing labor market, is a positive backdrop for the Bank of England to raise borrowing rates by the first quarter of 2022.


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