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Currency Market Analysis

Nov 24, 2021 | Currency Market Analysis

Global Themes

The U.S. dollar eked out fresh highs in data-driven, pre-holiday trade. The dollar strengthened to new 16-month peaks against the euro, and clocked another March 2017 high versus the yen.  Sterling floundered near an 11-month bottom, while the loonie flirted with eight-week lows. The so-called kiwi dollar plunged to seven-week lows after the country’s central bank erred on the side of caution and raised its key cash rate by only 25 basis points to 0.75%. The Aussie dollar also favored early October lows against the greenback. A raft of U.S. data today including third quarter growth, weekly jobless claims, and inflation will offer a key test of dollar sentiment.


The loonie dangled near its lowest level in nearly eight weeks against the stronger greenback. Subdued oil markets weighed on C$ sentiment, while it also didn’t help that commodity cousins from Down Under fell to early October lows against their U.S. counterpart. New Zealand’s Reserve Bank mulled a bolder 50 basis point rate hike today but ultimately erred on the side of caution with a modest 25 basis point increase to 0.75%, its second rate hike in as many months.


The euro skid to new 16-month lows after German sentiment deteriorated for the fifth straight month and hit 9-month lows in November. Germany’s influential Ifo index of business morale slipped to 96.5 this month, the lowest level since February, from 97.7 in October. Continued supply chain bottlenecks and climbing virus cases were the main drags on business confidence in Europe’s biggest economy.


Dollar bulls are a more grateful bunch after a raft of data that painted a mostly bullish picture of the recovery. The job market appears to be firing on more cylinders as weekly jobless claims fell below 200,000 (printing at 199K) in the latest period, far below forecasts of 260K from 270K the prior week. Third quarter growth enjoyed a one-tick upgrade to a 2.1% annual rate. Durable goods disappointed, falling 0.5%, but the accompanying gauge of business spending surprised to the upside, rising 0.6%. More data looms at 10 a.m. ET, when numbers on personal spending, inflation and housing get released.


The UK pound floundered around lows for the year against the greenback as global stocks weakened, depressing investor tolerance for risk. While the Bank of England may raise rates next month, the Fed is likely on its heels with Jerome Powell remaining in charge and seen having a lower tolerance of high U.S. inflation. And while UK inflation may climb to 5% by the spring, America’s comparable rate is already above 6%, the highest in three decades.  

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