Global overview
A cautious calm returned to markets Wednesday, leading the U.S. dollar to relinquish the bulk of its safe haven-inspired gains from a day earlier. The euro and sterling climbed back into positive territory for the week, with the former back within striking distance of recent one-year peaks. Canada’s dollar steadied after it sank to four-week lows the previous day. The greenback nursed losses against the yen, another refuge when the global outlook darkens, a sign of still shaky underlying market confidence. Markets are juggling an array of risk factors as fresh banking sector worries collide with economic data and looming central bank decisions. Markets were unsettled after a regional U.S. bank, First Republic Bank, reported that it bled more than $100 billion in deposits during the first quarter amid broader worries about the financial system following the collapse of Silicon Valley Bank and Signature Bank. While the dollar remains a go-to currency when risk aversion flares, its broader bias has turned negative given the more hawkish outlook for monetary policy abroad.
Euro pullbacks prove short-lived
The euro climbed out of the previous day’s hole as bouts of weakness continued to be undercut by favorable underlying sentiment. The euro rose to within arm’s reach of 2023 highs it reached against the greenback in mid-April – its highest level in more than a year. Up nearly 2% in April, EUR/USD was on track for its third monthly gain in four months as markets bet on more interest rate hikes to come from Europe this year than the U.S.
Sterling rises toward 10-month top
A cautious improvement in market sentiment was enough to lift the UK pound out of a momentarily hole for the week against the U.S. dollar. The pound rose to within a cent of recent June 2022 highs against the greenback, its strongest in 10 months, a reflection of bullish sentiment toward the UK currency. The theme of central bank policy divergence, with the Bank of England expected to out hike the Fed this year, widened further in the pound’s favor following last week’s red hot UK inflation report that showed prices spending a seventh consecutive month above 10%.
Loonie steadies ahead of BOC minutes
A softer greenback helped the Canadian dollar find a floor after sinking this week to four-week lows. The price of oil declined below $77, a sign that downside risks remain elevated for commodity-backed currencies amid lingering worries about global growth. The Bank of Canada today will release the minutes from its mid-April meeting at which it left interest rates steady for a second straight gathering at 4.50%, the highest in 15 years. The loonie could find support if the minutes play up economic resilience in Canada that led the central bank to upgrade its growth forecast for this year to 1.4% from “about 1%” three months earlier.
U.S. dollar index poised for 1.2% MTD decline
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Apr 24-28
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
