Global overview
The greenback was flat to firmer ahead of big-ticket data that could offer clues on the outlook for U.S. interest rates. Major rivals also steadied, keeping the euro, sterling, and Canadian dollar near multimonth lows. The trade-weighted dollar index, a gauge of its value against a basket of six major currencies, has appreciated 2% this month and climbed to 12-week highs as U.S. economic resilience contrasts weakness abroad. Stronger than expected data also has led to a hawkish repricing in the outlook for Fed policy. While the Fed is expected to pause rate hikes next month, markets are betting on a 60% likelihood of an increase by November. Key for the road ahead for American monetary policy will be reports this week on consumer confidence, due out today, Thursday surveys on consumer spending and inflation, and Friday’s always important read on nonfarm payrolls. Further evidence of an economy faring better than expected would bolster conviction in the dollar positive narrative of U.S. lending rates staying high for longer.
Euro maintains defensive bias
The euro maintained a defensive bias as it hovered near 10-week lows below 1.08 against the greenback. Recent data has suggested that the U.S. economy is firing on more cylinders than Europe, weighing on the euro. A key focus of attention this week for the single currency will be a Wednesday report on economic sentiment across the euro zone. The survey is forecast to fall for a fourth straight month in August. A weaker print would reinforce the fragile economic backdrop in Europe and do little to arrest the euro’s slide.
Sterling anchored near lows
Sterling seesawed around 1.26 against its U.S. rival as the UK unit continued to nurse wounds inflicted by downbeat data on the British economy. A lack of much meaningful UK data this week may make it harder on sterling to stabilize after its tumble inside of 1.2550 last week, its lowest level in 10 weeks. A report Friday is forecast to confirm that UK manufacturing contracted at the fastest pace (42.5) since May 2020 in August.
USD/CAD tops 1.36
A weaker Canadian dollar edged back above 1.36 against the U.S. dollar, keeping USD/CAD within arm’s reach of 12-week highs. The loonie has endured a turbulent August as its 3% swoon erased its YTD gain. Still, much of that retreat stems from global economic uncertainty in the face of mounting evidence of a decelerating Chinese economy. Canada issues second quarter growth on Friday. It may take fresh evidence of a resilient Canadian economy to put a sturdy floor under the loonie. Forecast suggests Canada’s economy grew at a 1.2% annual rate in the spring quarter, down from a 3.1% pace in Q1.
Firm dollar looks to data for direction
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Aug 28-Sep 1
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.
