Global overview
Camped near two-month peaks, the U.S. dollar was on track for a fifth advance in as many weeks amid a darkening outlook for global growth. The euro and Canadian dollar were little changed, keeping both near six- and 11-week lows, respectively. Sterling’s hold on a weekly gain faded after disappointing news on UK consumer spending. The greenback has been on the upswing as economic pessimism abroad contrasts growing confidence in the world’s largest economy. Meanwhile, worries are mounting that China’s economic woes could spread beyond its borders and deal a setback to already fragile recoveries in places like Europe, Canada, and Australia. Bullish news on the U.S. economy this week has stiffened the wind at the dollar’s back. American numbers this week on retail sales, industrial production, and weekly jobless claims all proved better than expected. Moreover, the latest Fed minutes showed that policymakers were reluctant to ditch their rate hiking bias anytime soon, given the ‘significant’ upside risks to the inflation outlook. A fifth straight week of gains for the U.S. dollar index, which measures its value against a broad basket of currencies, would mark its longest in 15 months.
China malaise weighs on euro
The euro was on course for its fifth decline in a row against the U.S. dollar after ending the previous week above 1.0940. A decelerating Chinese economy threatens to compound the downside risks facing European growth, given the bloc’s reliance on Chinese demand for its exports. The euro’s fall was slowed a bit Friday after final euro zone inflation numbers for July confirmed that prices grew at a 5.3% annual rate, down from a peak above 10% last fall, but still far above the European Central Bank’s 2% goal, keeping higher interest rates in play.
Sterling cuts weekly gain after UK economy disappoints
The UK pound squandered some of its weekly gains after downbeat news on the British consumer suggested a less resilient economy. Retail sales tumbled 1.2% in July or more than double forecasts of a 0.5% fall which marked the second contraction since March. A close above 1.27 Friday would allow GBP/USD to snap a four-week slide. Hotter than expected UK inflation and wage data this week have buoyed the pound by keeping the path clear for the Bank of England to extend is most aggressive rate hiking cycle in a generation.
USD/CAD seesaws in and out of positive territory for 2023
Canada’s dollar weaved in and out of positive territory for the year against the greenback as global weakness weighed on risk tolerance and commodity-linked currencies. Still, downside for the loonie has been curbed thanks to hotter than expected domestic inflation that strengthened the case for Ottawa to raise interest rates from 5%. The Bank of Canada meets three more times this year – Sept 6, Oct 25, and Dec 6 – with the door seen open for a hike by year-end after consumer inflation accelerated at a 3.3% annual rate in July from 2.8% in June, a print well above central bankers’ 2% target.
U.S. dollar index on cusp of longest weekly rally in 15 mos.
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Aug 14-18
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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.
