Global overview
A holiday-thinned start to the new week found the U.S. dollar camped near the top of its ranges. FX markets steadied with London closed Monday for a late summer holiday. The listless session kept the greenback near 10-week highs versus the euro and sterling, while Canada’s dollar hovered around 12-week lows. The U.S. dollar rose last week after remarks from Fed Chair Jerome Powell acknowledged that inflation remained too high and signaled the door remained open for policymakers to raise interest rates from 22-year highs around 5.4%. Markets are about 80% confident that the Fed will pause rate increases when it issues its next policy decision on Sept 20. However, a mix of solid data and Mr. Powell’s hawkish reminder Friday at Jackson Hole, Wyo., that rates may need to rise further show the odds of a November increase at more than 50%. The coming week could be instrumental in shaping the near-term path for Fed policy with America’s monthly jobs report due Friday. Nonfarm payrolls are forecast to increase by 170,000 in August from July’s gain of 187,000. Unemployment is expected to remain low around 3.5%.
Euro hovers near 10-week bottom
The euro steadied above mid-June lows against its U.S. rival thanks to market activity being subdued by a London holiday. For the month, EUR/USD was down about 1.6%, weighed down by domestic economic weakness that suggested area borrowing rates may be closer to peak levels than previously thought. Key for the European Central Bank’s rate debate will Thursday surveys on euro zone inflation and unemployment. Inflation is forecast to moderate to a 5.1% annual pace in August from 5.3% in July.
Sterling catches a holiday respite
The UK pound caught a holiday respite as it held its chin above the prior week’s mid-June bottom. UK growth worries resurfaced last week after data showed that both manufacturing and services growth contracted this month. Weaker data is consistent with a lower peak in area lending rates. The resulting dovish repricing in the outlook for Bank of England interest rates weighed sharply on the pound. A lack of much British economic indicators this week means sterling could take its main cues from the direction of the greenback and broader risk sentiment.
Spotlight shines on Canada’s economy
Canada’s dollar was little changed around its lowest level in 12 weeks against the greenback. The loonie has fallen prey to concerns about a China-led slowdown in global growth, a worrisome backdrop that suggests weaker demand for Canada’s resource exports like oil. Downside for the loonie has been limited by signs of a resilient Canadian economy. Canada Friday issues growth surveys for the month of June and the second quarter that markets will use to gauge the likelihood of Ottawa raising rates from 22-year highs of 5%. Forecasts suggest quarterly growth in the spring cooled to a 1.2% annual pace from 3.1% in the first quarter.
Dollar favors top of recent ranges
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Aug 28-Sep 1
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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.
