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Currency Market Analysis

Nov 23, 2021 | Currency Market Analysis

Global Themes

Same themes, new highs for the U.S. dollar which cruised to 16-month peaks against a broad basket of rivals. The strong greenback rose to 2021 highs versus the euro, yen and sterling, and climbed to late September peaks versus the Canadian dollar. The dollar remained buoyant a day after President Biden tapped Jerome Powell to serve a second four-year term has head of the U.S. central bank. The buck strengthened on the news as Mr. Powell is likely to tame rising inflation by raising interest rates next year. The safe haven dollar also is benefiting from rising virus cases, renewed lockdowns, and a cloudier outlook for global growth. Turkey’s lira took a spectacular plunge of more than 10% Tuesday, as the country’s currency crisis intensified. 


The loonie’s fall to new seven-week lows caused the Canadian currency to all but erase its gain for the year against the greenback. Global oil markets slipped after the Biden administration tapped strategic reserves to ease high energy prices and help prop up the American president’s sagging approval rating. Oil was modestly weaker around $76, near recent seven-week lows. 


The UK pound fell to 11-month lows as the greenback extended its dominant run and European equities faltered. Sterling’s losses were modest though, helped in part by better than expected news on the British economy that kept alive prospects for a December rate hike. Factory growth unexpectedly accelerated in November while services activity slowed less than expected. Solid UK data over the past week suggests an elevated risk of the Bank of England raising rates from 0.1% on Dec. 16.


The euro carved out fresh 16-month lows overnight against the greenback but found tentative footing after better than expected data from the bloc. German and euro zone factory growth both fared better than expected in early November, reassuring news that eased pressure on the euro. Germany’s Ifo survey of business optimism looms Wednesday with moderation in the cards, an outcome that if realized would threaten to renew downward pressure on the euro. 

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