Global overview
The UK pound was among the top performing major currencies Friday thanks to relatively bullish news on the British economy. The buck was subdued but still on track to extend a weekly winning streak with downside curbed by worries about global growth. The euro firmed but kept below the previous day’s two-week high, while the Canadian dollar was on pace for another weekly decline. The dollar dipped on Thursday after a smaller than expected rise in U.S. inflation last month maintained a high bar for the Fed to raise interest rates again. Bouts of dollar weakness of late have proven relatively short-lived given that core inflation continues to make a gradual and sticky descent from recent highs with the latest level, 4.7% over the last 12 months, more than double the Fed’s 2% goal. It’s looking increasingly doubtful that the Fed will need to raise rates above and beyond the 525 basis points in tightening that it’s delivered since March 2022. Still, lots of data remains until Fed officials issue their next rate decision on Sept 20.
Euro wavers below 2-week high
The euro seesawed around the key 1.10 threshold with upside capped by markets’ reluctance to venture too far from the safer bet greenback for sustained stretches. Soft to weaker growth from Europe has led markets to scale back expectations for the European Central Bank to raise interest rates from 3.75%, the bank’s highest level in more than two decades. The euro will look for direction next week from Germany’s ZEW survey of investor confidence on Tuesday, second quarter euro zone growth Wednesday, followed by the final July reading of euro area inflation on Friday.
Resilient British economy signals higher UK rates ahead
The British pound rose above one-week lows below 1.27 on reassuring news that the UK economy extended its streak of resilience through June. The British economy accelerated at a 0.5% pace in June, more than double forecasts of 0.2% and a solid bounce back from a mild contraction in May. Riding June’s improved momentum, UK second quarter growth also topped forecasts by expanding 0.2% versus expectations to flatline. While today’s data signals full steam ahead for the Bank of England to raise rates for a 15 straight time on Sept 21, the pound’s Friday pop lacked conviction as the prospect of higher rates makes for a more uncertain and challenging UK economic outlook.
C$ at risk of extending weekly slide
Canada’s dollar ticked higher Friday but not enough to ward off the risk of a fourth consecutive weekly decline against its U.S. counterpart. The loonie’s stretch of softness has at least been slowed by oil’s climb this week to 2023 highs above $84. Broader loonie sentiment has been injured by the precarious outlook for global growth following a steady stream of underwhelming and worrisome data from China, the world’s second-largest economy. Canada issues updated consumer inflation data Tuesday after price growth moderated to more than 2-year lows below 3% June. Inflation holds the biggest key to the outlook for Bank of Canada interest rates.
Dollar steadies after CPI-driven slide
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Aug 7-11
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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.
