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Currency Market Analysis

Nov 08, 2021 | Currency Market Analysis

Global Themes

A choppy U.S. dollar alternated between modest gains and losses ahead of midweek inflation data. The UK pound and Canadian dollar steadied above multiweek lows, while the euro hovered around its weakest since mid-2020. The greenback rolled to fresh highs for the year last week after stronger than expected U.S. jobs data kept the Fed on track to raise interest rates next year. America added just over 530,000 jobs in October, a robust amount that lowered unemployment to a new pandemic low of 4.6%. A hot topic will be in focus this week as consumer prices are forecast to accelerate at a 5.8% annual rate in October from 5.4% which if realized would be the fastest pace in decades. U.S. jobless claims, due Wednesday ahead of the Veterans Day holiday Thursday, are forecast to improve.


The Canadian dollar firmed above three-week lows as it mirrored oil market movements, a key focus given a dearth of domestic data this week. A softer greenback also translated into support for the loonie. Canada’s dollar has pushed off recent highs as softer economic data of late have dampened prospects for Ottawa to raise interest rates as soon as the spring. Oil rose as high as $82 early Monday after it momentarily slipped below $80 last week, the lowest level in nearly a month.


Buoyant risk sentiment with stocks generally higher, coupled with a softer greenback, helped the UK pound recover from five-week lows. The bottom fell out of sterling last week after the Bank of England voted 7-2 to maintain low interest rates for longer than many central bank watchers had anticipated. British numbers this week could validate the BOE’s steady hand on policy as third quarter growth Thursday is forecast to decelerate to a 1.5% quarterly rate from 5.5% during the second quarter. Slower growth would tend to weaken the case for London to raise rates as soon as December.


The euro stabilized after sinking last week to new July 2020 lows against the greenback. A Tuesday survey on German investor confidence may shed light on whether the euro’s modicum of support has legs. Forecasts suggest Germany’s influential ZEW index deteriorated for a sixth straight month to 20.0 in November from 22.3 in October.

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