Global overview
The greenback edged below late June highs on caution ahead of key data on America’s main growth engine. The euro and sterling caught a data-inspired lift that hoisted both currencies above their lowest level in over a month. Canada’s dollar fell to one-week lows near 1.35 after a surprise rate cut from China didn’t allay broader concerns about the health of the world’s second-largest economy. Germany’s ZEW survey unexpectedly improved in the latest period, a hopeful sign that Europe’s biggest economy may turn the corner in the months ahead. UK wage inflation proved the highest on record during the second quarter, keeping the path clear for London to raise rates next month. Another batch of lackluster data from China led Beijing to slash one of its key borrowing rates by 15 basis points to 2.50% from 2.65%. Look for the consumer to help steer North American markets today with reports on U.S. retail sales and Canadian consumer inflation. Fresh evidence of a resilient U.S. economy would tend to keep upward pressure on Treasury yields. The yield on the benchmark 10-year Treasury ascended to fresh 2023 highs above 4.23%.
German optimism improves
The euro rebounded above Monday’s 5-week low against the U.S. dollar (1.0875) thanks to a surprise brightening in German optimism. Germany’s ZEW survey of investor confidence unexpectedly improved in August with a print of minus 12.3, which compared to expectations for sentiment to steady at July’s minus 14.7. While a step in the right direction, the data isn’t likely to lend meaningful support to the euro after a subcomponent of the survey showed that current conditions deteriorated more than expected. Still, the data was enough to keep alive hopes that the German economy, which hasn’t grown since the third quarter of 2022, may turn the corner by year-end should major central banks halt growth-crimping rate hikes.
UK posts record wage growth
Sterling rose above 1 ½ month lows against the greenback (1.2615) after mixed UK jobs data kept the path clear for the Bank of England to extend its inflation-fighting tightening cycle next month. British wage growth advanced at a record rate of 7.8% in the three months ending in June from an upgraded 7.5% pace the prior period. Gains for sterling were tempered, however, by a worrisome rise in British unemployment to 4.2% in the same period, two ticks north of forecasts to remain at 4% and the highest level since October 2021. Today’s data played up expectations for higher rates and slower UK growth, something for both sterling bulls and bears.
Canada inflation accelerates; U.S. retail sales prove robust
Canada’s dollar edged above one-week lows near 1.35 after domestic inflation accelerated more than expected and kept the door cracked for Ottawa to raise rates. Canadian consumer inflation accelerated at a 3.3% annual rate in July from June’s 27-month low of 2.8%. The data emphasized the Bank of Canada’s concern that inflation could stall on its way back down to its 2% goal. The U.S. dollar strengthened after robust consumer spending suggested the world’s biggest economy gained momentum over the third quarter. Retail sales rose 0.7% in July, more than double June’s revised increase of 0.3%. The data was the latest in a lengthening string of resilient numbers that reinforced the Fed’s higher for longer rate outlook.
Dollar camped around 1 ½ month peaks
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Aug 14-18
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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.
