Global overview
The U.S. dollar padded its weekly gains as the yen plunged amid dwindling expectations for Japan to tighten monetary policy anytime soon. The U.S. dollar index climbed to 1 ½ week highs and was on pace for its first weekly gain in three weeks. Tumbling currencies abroad like the yen and sterling offered a reprieve for the oversold greenback while it also helped that markets are keeping a watchful eye on economic divergence, a focus that’s casting the world’s largest economy in a comparatively brighter light. Sterling collapsed this week from 15-month highs as signs of domestic disinflation gaining traction dampened hopes for more aggressive policy tightening by the UK central bank. Meanwhile, America’s still chugging along economy kept a pillar under the buck following good news on the U.S. job market. Weekly jobless claims unexpectedly improved, according to Thursday data, and fell to the lowest level in more than two months. U.S. economic resilience could keep the Fed from signaling it is shutting the door to higher interest rates after an expected hike next week.
Euro falls to 1 ½ week low
The recently overbought euro was on track for a losing week against the greenback. The euro peeled away from 17-month highs (1.1275) as the single currency struggled to sustain its gains amid mounting signs of a resilient American economy. By contrast a survey of German business optimism next week is forecast to continue a moderating trend which if realized would signal little hope of the bloc’s biggest economy turning things around after it tipped into a technical recession early this year.
Sterling poised for worst week since February
A forgettable week for sterling saw the UK unit shed more than two cents, or 1.8%, against its U.S. counterpart after a larger than expected slowing in British consumer inflation suggested bets on domestic borrowing rates peaking above 6% were overly optimistic. The pound has spent the entire week below its recent 15-month peak of 1.3144 and has fallen below 1.2850 as markets scale back expectations for how high rates may rise from 15-year highs of 5%. UK retail sales Friday surprised higher with a 0.7% surge in June, though May spending was downgraded.
C$ steady ahead of consumer spending
Canada’s dollar was in line for a second straight weekly advance against its U.S. rival ahead of news on the nation’s consumer. Retail sales are forecast to rise for a second straight month in May with forecasts suggesting a 0.5% increase after a 1.1% spending spree in April. Canada’s tight job market and historically low unemployment are expected to put a tailwind on the consumer. Key for the loonie will be forecasts for June spending after the Bank of Canada raised lending rates to 22-year highs of 5%.
Dollar bounces toward top of weekly range
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: July 17-21
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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.
