Currency Market Analysis
Nov 29, 2021 | Currency Market Analysis
The U.S. dollar stabilized as a tentative, though still cautious, calm returned to markets following Friday’s global meltdown. The greenback rebounded against the euro, yen and sterling, while commodity currencies from Canada and Australia recovered from two- and three-month lows, respectively. Boding somewhat encouragingly for market sentiment, South Africa’s rand was among the top performers Monday. South Africa is credited with discovering the latest strain of the coronavirus that the world is scrambling for clarity on its transmissibility and severity. The dollar tumbled late last week as Treasury yields fell, a sign of a cloudier outlook for Fed policy. Markets are reassured by hopes that vaccines can be adjusted to tackle Omicron. Still, much uncertainty remains which threatens to keep markets on volatile ground over coming weeks. Omicron will share the stage this week with U.S. data on consumer confidence Tuesday, weekly jobless claims Thursday and nonfarm payrolls Friday.
Sterling tilted on its back foot, keeping the UK unit near December 2020 lows. While market sentiment tentatively recovered Monday, ordinarily a positive for sterling, the pound has been dogged anew as the Omicron variant has injected greater uncertainty about whether the Bank of England would raise borrowing rates next month.
A 5% pop in oil to $72 helped the loonie rebound from more than two-month lows against its U.S. counterpart. The loonie had fallen prey to oil’s more than $10 slide Friday to $68, as the Omicron strain of the coronavirus added to demand uncertainty. Canadian economic fundamentals will be under the microscope this week with third quarter growth due Tuesday and forecast rebound to an annual rate of 3% after the more than 1% decline in the second quarter. Slightly quicker hiring of 35,0000 jobs is on the cards for Friday’s November employment report.
The euro drifted below one-week highs as the weekend allowed global markets to catch their breath after Friday’s global rout. The euro enjoyed a short squeeze rally that catapulted it about 1 ½ cents above July 2020 lows against the greenback. The euro’s fundamental posture remains bearish as Omicron threatens to prolong the bloc’s already long and winding road to recovery from the pandemic.
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