Global Themes

The U.S. dollar continued to correct higher, a rebound that allowed it to clock one-week highs versus rivals from the euro zone, Japan and Britain. The buck also flirted with two-week peaks versus commodity peers from Canada and Australia. Elevated U.S. Treasury yields are offering support to the greenback, with the 10-year keeping in arm’s reach of 3%, a level last touched four years ago. Many also took to reducing negative bets on the U.S. currency ahead of today’s release of the minutes from the last Federal Reserve meeting. The intimate details of the Fed’s late January meeting, the final one under Chair Janet Yellen, are expected to cement an imminent interest rate hike. With sentiment still negative on the buck, the minutes might need to sound an overtly hawkish tone to keep it above three-year lows. The Fed minutes are due at 2 p.m. ET.


Sterling slumped to one-week lows after mixed news on Britain’s job market. Wages rose but at 2.5% during the fourth quarter remained below the rate of inflation which is running at a 3% pace. The jobs data also showed a surprise rise in unemployment which ticked up to 4.4%. The mixed data stopped short of cementing a U.K. rate hike in May, which weighed on sterling. 


Canada’s dollar was back near late December lows against its U.S. rival, pressured by lower oil prices and a higher greenback. Oil moderated below $62 which put a headwind on currencies with close links to commodity prices. America’s dollar index climbed to one-week peaks ahead of minutes today from the last Fed meeting that could set the stage for an imminent increase in U.S. borrowing rates. Canada has big data on the radar this week with numbers due Thursday on retail sales and consumer inflation on Friday.


The yen fell to one-week lows, a decline that shaved about 2% in value since it climbed to 15-month peaks last week. The yen underperformed against the firmer dollar, a retreat that gained traction after Japan’s top currency official, Masatsugu Asakawa, dubbed moves in USDJPY as “one-sided” and in favor of the Japanese unit.


The dollar took aim at key technical levels against its rivals and rose to one-week peaks in the process. Elevated Treasury yields supported the dollar while caution ahead of today’s Fed minutes catalyzed many to reduce bearish bets on the greenback. The still-soggy outlook for the dollar means that today’s Fed minutes might need to sound a decidedly hawkish note to sustain its correction. The minutes could come across stale since the Fed’s last meeting took place before the recent bout of market turmoil that was triggered by fears of rising U.S. inflation.


The euro slipped to one-week lows against the greenback, succumbing to profit-taking after notching fresh three-year highs last week. Underlying sentiment remains bullish on the single currency after data from the bloc today were consistent with a continued economic boom. Should today’s Fed minutes, due at 2 p.m. ET, fail to strike a sufficiently hawkish signal for dollar bulls, the euro could quickly rebound and test the roof of its range.

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