Global overview
Worries about global growth flared Monday, helping the downtrodden U.S. dollar hold just above 15-month lows. The dollar fell to another 16-month low against the euro, but it steadied above its weakest in 10 and 15 months versus counterparts from Canada and Britain, respectively. The dollar staged its sharpest tumble of the year last week after cooler than expected U.S. inflation figures stoked optimism that the Federal Reserve may be able to halt interest rate hikes sooner rather than later. The Fed next week is expected to hike its key rate by 25 basis points from about 5.1%. But if inflation continues to make a steady descent a July rate hike could conceivably be the U.S. central bank’s last of its most aggressive tightening campaign in decades. Meanwhile, China’s economy accelerated at a 6.3% annual rate in the second quarter from a 4.5% pace in the first quarter. Still, China’s second quarter performance undershot forecasts of 7.3%, which dialed up pressure on Beijing to redouble stimulus to support the world’s No. 2 economy.
Euro notches 16-month high
The euro squeezed more juice out of a rally that’s propelled it to 16-month highs against its weaker U.S. rival. Expectations for U.S.-euro zone interest rate differentials to narrow have provided the main fuel for the euro’s resurgence. The euro’s sharp gains over a short period of time can leave them a bit vulnerable, particularly since nothing has materially improved for the bloc’s economic prospects. Euro zone data Wednesday that confirms inflation grew at an elevated rate of 5.5% in June would keep the path clear for the ECB to deliver a quarter-point hike to 3.75% on July 27.
Sterling steadies ahead of UK data
The UK pound steadied below 15-month highs against the greenback on caution ahead of key domestic data that will help shape expectations for British central bank policy. UK inflation Wednesday is forecast to cool to a still high 8.2% annual pace in June from 8.7% in May. Recent inflation numbers have surprised to the upside, leading markets to reprice more pound-positive rate hikes from the Bank of England. Should inflation again surprise higher, it could catalyze further sterling appreciation by bolstering the case for a second straight 50 basis point hike by the BOE in early August.
China concerns nudge C$ below 10-month peak
Commodity currencies eased off recent highs against the U.S. dollar, following data from China that failed to allay growth concerns. China’s economy grew at a 6.3% annual rate in the second quarter, quicker than the first quarter’s pace of 4.5%, but well below forecasts of 7.3%. China weakness suggests Asian demand will be more tepid for the resource exports from places like Canada, Australia, and New Zealand. Canadian consumer inflation Tuesday is forecast to cool to a 3% annual rate in June from 3.4% in May.
Dollar pinned near lows
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: July 17-21
Have a question? [email protected]
*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.
