Global overview
The U.S. dollar steadied after surging this week to a range of multimonth highs. The euro and sterling flirted with three-month lows while Canada’s dollar notched a five-month bottom. The buck continues to gain popularity as downbeat data weighs on market morale and spurs a flight to safety. The dollar is also finding support as signs of a generally resilient U.S. economy galvanize expectations for the Fed to maintain high borrowing rates for longer. Data Wednesday did little to allay concerns about moderating global growth as German factory orders plunged more than 11% in July. Meanwhile, the 0.2% slide in euro zone consumer spending was bigger than expected. North American markets today will look for a steer from U.S. services growth and a policy decision by the Bank of Canada. The dollar could have its rise checked if services activity underwhelmed last month. No change to Canada’s 5% interest rate is expected following the economy’s disappointing performance last quarter when it unexpectedly contracted.
Euro stabilizes around 3-month low
The euro treaded water above the previous day’s nearly six-month trough against the greenback as it found tentative support as markets gave the ECB the benefit of the doubt that it could raise rates for a 10th straight meeting on Sept 14. Still, upside remained a challenge for the euro after German industrial orders plunged 11.7% in July which was nearly triple forecasts of a 4% fall. EUR/USD’s latest leg lower has moved the pair closer to its 2022 close of 1.0702.
Risk aversion tightens lid on sterling
The UK pound remained subdued and anchored near three-month lows against its U.S. counterpart amid elevated worries over global growth. Up about 3.7% versus the greenback this year, sterling remains among the top performing major currencies. Still, the flight to safety in the greenback has caused the pound to shed about six cents from its mid-July high above 1.31. The pound continues to draw underlying support from expectations for the Bank of England to hike rates at least two more times from 5.25%.
C$ favors back foot ahead of BOC decision
Canada’s dollar steadied just off a five-month bottom against the greenback in cautious trade. The loonie faces a key event risk today in the Bank of Canada’s policy decision. Come 10 a.m. ET, Ottawa is widely expected to hold its main interest rate steady at 5%, the highest in 22 years, amid signs of a slowing economy. The loonie would be vulnerable should policymakers emphasize the economy’s surprisingly weak performance during the second quarter when it contracted 0.2% which compared to the central bank’s own forecast for GDP growth of 1.5%.
Haven dollar rolls to nearly 6-month high
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Sep 4-8
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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.
