Global overview
The U.S. dollar steadied after an overnight pop to two-week highs. The euro neared a one-week bottom while rivals from Britain and Canada slipped to two-week lows. The dollar bounced higher a day earlier after Fed Chair Jerome Powell signaled faith in the central bank’s forecast of more rate increases to tame high inflation. The hawkish tone to Mr. Powell’s remarks at the ECB’s summer conference led markets to price in a greater likelihood of the Fed resuming rate increases as soon as July. Other central bank chiefs continued to play up prospects for ongoing rate rises to cool inflation. Sterling endured its worst day in weeks Wednesday after the head of the Bank of England signaled more inflation- and economy-slowing rate hikes to come. The loonie backpedaled from September 2022 highs after cooler domestic inflation this week weakened the case for the Bank of Canada to raise rates next month. Data holds a key to how currencies finish out the quarter with U.S. numbers today on growth and jobs followed by indicators Friday on spending and inflation.
Euro supported by hotter German inflation
Mixed European data showing hotter German inflation buoyed the euro by keeping the path clear for the ECB to raise rates for a ninth straight meeting in July. German consumer prices rose at an annual rate of 6.4% in June compared to forecasts of 6.3% from 6.1% in May. The ECB’s hawkish rate stance has served as sturdy pillar of strength for the euro. Still, lurking near the surface are worries about moderating European growth as another survey today showed that economic sentiment across the euro zone slipped more than expected to 95.3 in June from 96.4 in May.
Sterling subdued by UK growth concerns
Sterling stabilized albeit with a fragile bias after a drubbing the previous day knocked the UK unit to two-week lows. Bullish sentiment that recently powered sterling to one-year highs faded after the Bank of England’s aggressive rate hike last week dented economic optimism. The fear is that the higher UK rates climb the more damage it could do to the economy. Going forward, sterling would be susceptible to weaker UK data that validates growth concerns.
Loonie falls; U.S. data tops forecast
The Canadian dollar fell to two-week lows, putting at risk a four-week winning streak against its U.S. rival. The loonie suffered a data setback this week after domestic inflation cooled to a 3.4% annual rate in May, the lowest level in two years. Lower inflation means a lower likelihood of the Bank of Canada following up its June rate hike with another in July. Canada’s rate outlook remains fluid and will next look for steering from monthly growth on Friday and next week’s employment report. Elsewhere, the greenback rose after better-than-expected U.S. data backed the case for more Fed rate hikes. Weekly jobless claims improved by 26,000 with a print of 239,000 from a revised 265,000 the previous week, the highest level since October 2021. U.S. first quarter growth got better with age as it was revised up to a 2% annual pace from the previous estimate of 1.3%.
Dollar camped near upper end of ranges
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Jun 26-30
Have a question? [email protected]
*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.
