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Risk aversion lifts dollar above recent lows

Euro flirts with 1-year highs; sterling hasn’t pulled off a feat this ‘positive’ since Feb. 2022. USD/CAD rises to late March peak.

Joseph Manimbo

Global overview

Jittery global markets helped the U.S. dollar stabilize after it flirted with recent lows. The dollar ticked higher against the euro and sterling and rose to late March peaks against the Canadian dollar. Market optimism is in shorter supply ahead of a raft of corporate earnings and economic data that may offer evidence of moderating global growth. The greenback continues to take two steps back and one step up on the view that the Fed is almost done raising rates and may need to cut them by year-end if the world’s biggest economy teeters on the brink of recession. The U.S. economy dominates the spotlight this week with big numbers on first quarter growth Thursday and an inflation update Friday. Slower growth and cooler inflation, if realized, could give the Federal Reserve confidence to raise rates one last time. By contrast, central banks abroad in places like Europe appear to be in the middle innings of lifting borrowing rates, a more hawkish outlook look that’s keeping the euro and sterling well-supported. A report today is forecast to show U.S. consumer confidence ebbed in April.

Euro flirts with 1-year highs

The euro made a close encounter overnight with recent one-year peaks against the U.S. dollar. Euro bulls are feasting on the prospect of getting paid more interest if the ECB remains on a hawkish rate path to bring down still high inflation that’s running just below 7%, far above the central bank’s 2% target. Moreover, markets appear to be somewhat split over whether the ECB on May 4 might raise rates by 25 or 50 basis points from 3%. The euro also was underpinned by data this week that showed Germany’s Ifo survey of business confidence extended a brightening trend in April.  

Sterling hasn’t pulled off a feat this ‘positive’ since Feb. 2022

Bullish sentiment drove sterling toward recent 10-month peaks against its U.S. rival. The UK currency pared some of its gains, though, as risk aversion resurfaced and eased pressure on the safe bet U.S. dollar. Sterling has a big positive on its side as markets brace for more rate hikes from Britain, compared to the left side of the Atlantic. In a particularly positive sign for sterling’s prospects, market data last week showed that bets had turned positive on the pound for the first time in more than a year.  

USD/CAD rises to late March peak

Canada’s dollar languished near four-week lows against its safer U.S. counterpart, partly on investor skittishness over global growth. Canada’s economy later this week could add to signs of slowing global growth with a report on February GDP forecast to moderate to a 0.2% monthly pace from 0.5% in January. While vulnerable to the highest borrowing rates in 15 years at 4.50%, Canada’s economy has remained resilient thanks to a solid job market. It may take new signs of economic resilience to help stem the loonie’s recent retreat.

Dollar index camped just above 2023 lows

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.

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