Global overview
A little changed U.S. dollar was camped near one-week peaks and on track for its best weekly performance in months. The UK and Canadian currencies hovered around one-week lows against their U.S. counterpart while the euro slumped to a one-month bottom. Dollar gains this week have been multidimensional. The buck has served as a safe harbor from worries about a weak Chinese economy and volatility on Wall Street. Elevated U.S. inflation spurred some skepticism in the Federal Reserve cutting interest rates by year-end. Meanwhile, the perception that central banks abroad may be closer to joining the Fed on the sidelines weighed on European currencies. The Bank of England delivered a 12th straight rate hike this week, but the UK central bank didn’t sound any more hawkish which underscored how it’s grappling with high inflation and low growth. While stronger, it’s too soon to tell whether the dollar’s run of weakness has turned the corner. Markets would need to take rate cuts off the table to lend meaningful upside traction to the greenback.
EUR/USD skids to 1-month lows
The euro slipped to one-month lows against its recovering U.S. counterpart whose safe-haven status was boosted this week by worries about moderating global growth. The euro accounts for the largest slice of the U.S. dollar index which has appreciated about 0.8% this week and was on track for its best weekly performance since February. The euro’s recent surge to one-year highs has dissipated after the ECB last week hinted that it could be closer to the end of its policy tightening journey than previously thought, given the fragile shape of the 20-country bloc’s economy.
GBP/USD hits a floor
The UK pound steadied around one-week lows against the dollar after weak UK growth numbers reinforced a less hawkish outlook for British monetary policy. The British economy grew at a tepid 0.1% quarterly pace in the January-March period, matching its performance over the final quarter of last year. But growth sagged toward the end of the first quarter as the economy unexpectedly contracted by 0.3% in March. The Bank of England delivered a 12th consecutive rate hike this week, a quarter-point move to 4.5%, but its guidance on future policy stopped short of markets’ more hawkish expectations. The pound’s rally to one-year highs has been punctured, given the UK’s status of having the highest inflation and lowest growth among major economies.
USD/CAD climbs to 1-week highs
A revival of the U.S. dollar and oil on track for a fourth consecutive weekly decline conspired to push the Canadian dollar to one-week lows. The loonie was on track to shed about 1% in value this week against its southern neighbor as weak data from China weighed on commodity-backed currencies. An absence of much Canadian economic indicators this week led the C$ to look to external drivers, like global risk sentiment, for direction. The loonie will have no shortage of domestic drivers next week with April consumer inflation set for release Tuesday and retail sales due Friday. Canadian inflation is currently at a 19-month low of 4.3%, while retail spending is forecast to contract for a second straight month in March.
Dollar poised for best week since February
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: May 8-12
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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.
