Global overview
The U.S. dollar rebounded from one-week lows as markets readied for more important data on the world’s largest economy. The buck edged up toward recent four-week highs versus the euro and sterling and its strongest in eight weeks against the Canadian dollar. The dollar index sank to one-week lows Friday after slower than expected U.S. hiring last month raised an already high bar for the Federal Reserve to raise lending rates when it issues its next policy decision on Sept 20. America netted 187,000 jobs in July, slightly above June’s downgraded increase of 185,000, compared to forecasts for an increase of 200,000. The dollar’s fall was cushioned by news that wage growth proved hotter than expected, while the still solid pace of hiring was enough to nudge unemployment down a tick to 3.5%. The spotlight remains on the U.S. economy this week with a Thursday update on consumer inflation. Headline consumer prices are forecast to tick up to an annual rate of 3.3% in July from 3% in June. Less volatile core inflation that the Fed sees as a better barometer of where inflation may be headed is expected to tick down to 4.7% from 4.8%.
Euro’s bounce undercut by data
The euro’s U.S. jobs-inspired bounce to August highs (1.1041) against the greenback faded after data intensified the spotlight to global fundamentals that cast the German economy in a dimmer light. German industrial output plunged by a larger than expected 1.5% in June, the second straight monthly decline that emphasized the headwinds facing Europe’s largest economy. The weak data added traction to the view that ECB lending rates, currently at 22-year highs of 3.75%, may be at or near peak levels.
Sterling subdued after extending losing streak
Sterling’s U.S. jobs-induced bounce above one-month lows subsided as markets readied for data on the other side of the pond that could highlight the still-unlocked door for the Fed to hike borrowing rates. Sterling posted its third decline in as many weeks last week, but it pared its losses after slower than expected U.S. job growth hinted that the Fed’s aggressive inflation fight of raising rates may be over. Still, talk of the Fed being done hiking may be a premature notion, depending on what Thursday data reveal about the trajectory of U.S. inflation.
No holiday for loonie
Canada’s dollar tilted on its back foot in holiday trade with local markets enjoying a long weekend. The loonie carried a three-week skid into the new week with USD/CAD perched near two-month highs. The loonie struggled to make headway against the greenback after data Friday showed that Canada’s economy unexpectedly shed 6,400 jobs in July. That marked the second time in three months that Canada’s economy bled workers, worrisome news that weakened prospects for Ottawa to raise rates from 5% by year-end.
Dollar narrowly maintains upper hand
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.
