Daily Currency Update

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The Greenback falls after weak employment, housing, and growth numbers.

USD - United States Dollar

The US dollar has had a mixed start today against G10 majors after China passed a National Security Law for Hong Kong. However, at the time of this writing, the US dollar is only beating the Canadian dollar by 0.1 percent. As the economy re-opens, initial jobless claims are beginning to fall faster than the prior weeks. Initial jobless claims dropped to 2.12 million for the week of May 23rd versus the expected 2.1 million (note that the “actual” being less than the “forecast” is usually good for the US dollar). There are doubts that there is more hiring, but jobless claims might not include the people claiming the Pandemic Unemployment Assistance, as these individuals are not eligible for regular or extended unemployment benefits.

Additional economic data releases include the second revision of US GDP, which showed that the economy is now expected to contract at an annualized -5 percent in the January - March period versus the expected number of -4.8 percent. Also, Durable Goods Orders contracted 17.2 percent during April and Core Orders dropped 7.4 percent; both prints surpassed the previous forecasts. Finally, the U.S. pending home sales index fell by the most on record since 2001. This is an index of contract signings for purchases of previously owned US homes, which collapsed to a record low in April as Covid-19 lockdowns decreased prospective buyers.

Covid-19 has continued to damage the U.S. economy in recent weeks with business closures along with the US reaching the horrible milestone of 100,000 deaths from the coronavirus, the highest number in the world. However, Anthony Fauci said there’s a “good chance” a vaccine may be deployable by November or December.

Key Movers

The Euro holds above the 1.1000 handle against the Greenback after poor economic data in the US and despite US congress voting to authorize sanctions against Chinese officials for human rights abuses against Muslim minorities on Wednesday. US congress and the White House increased pressure on the government in Beijing amid rising tensions between US and China.

The RBA’s chief in Australia said the economy is doing better than it had initially thought, but it warned against withdrawing stimulus prematurely.

In general, higher inflation poses a risk to G10 economies as stimulus continues to come at full force and policy rates flirt with negative levels. For example, in the US, deflationary forces will dominate as the impact of Covid-19 continues in the short-term. Also, the ECB is concerned that lingering weakness in demand could create downside risks to inflation over the next few years.

Expected Ranges

USD/CAD: 1.3728 - 1.3820 ▼

EUR/USD: 1.0961 - 1.1069 ▼

GBP/USD: 1.2186 - 1.2363 ▼

AUD/USD: 0.6574 - 0.6679 ▼

NZD/USD: 0.6159 - 0.6229 ▼