Global overview
A quiet start to what could prove a noisy week allowed the U.S. dollar to hover around one-month highs. The greenback was mostly steady after it appreciated for the fourth time in as many weeks against the euro, sterling, and Canadian dollar. The dollar’s bounce over the past month has been fundamentally driven as recent data suggest a resilient U.S. economy. By contrast, weaker data from around the world in places like China and Europe have curbed risk sentiment and given the dollar a haven boost. The dollar found support after U.S. inflation surveys last week ticked higher and fanned concerns that elevated prices may not dissipate as steadily as recently anticipated. Markets continue to set a high bar for the Fed to hike in September, but elevated inflation has kept the door cracked for central bankers to tighten again before the end of the year. U.S. economic resilience is also keeping upward pressure on Treasury yields, making the buck more attractive, and dampening expectations for the Fed to cut rates anytime soon. Tuesday looms large with fresh updates on U.S. retail sales and Canadian consumer inflation.
Euro anchored near lows
The euro steadied Monday but its four-week slide against the greenback underscored cautious sentiment toward Europe’s single currency. Worries about lackluster European growth have weighed on the euro over the latter part of the summer. The bloc this week issues top-tier numbers on German investor confidence (Tuesday) and euro zone second quarter growth and July inflation on Wednesday and Friday, respectively. The euro may need upside surprises to the data to help it snap its losing streak.
Sterling steady as big week gets underway
The British pound was pinned near August lows against the greenback ahead of big-ticket domestic data that may shed light on the outlook for UK lending rates. While sterling has outperformed this year, with GBP/USD enjoying a nearly 5% gain, it has shed about 1% in August as confidence in Britain’s economy wavers following 14 consecutive rate hikes from London that pushed rates to 5.25%, the highest in 15 years. A big week for the UK economy kicks off with unemployment Tuesday and follows with inflation Wednesday and retail sales Friday. Inflation will garner the most attention with forecasts calling for consumer prices to moderate to a 6.8% annual rate in July from 7.9% in June.
USD/CAD firm ahead of data
Canada’s dollar neared one-week lows Monday ahead of influential domestic data this week. The bar appears high for the Bank of Canada to raise rates from 5% in early September, putting the focus on the country’s economy. Canadian consumer inflation Tuesday is forecast to accelerate to a 3% annual rate in July from June’s 27-month low of 2.8%. Elevated inflation above Ottawa’s 2% goal would signal an open door for the BOC to tighten before year-end.
Dollar steadies after CPI-driven slide
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Aug 14-18
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.
