Global overview
A mixed greenback was generally subdued on caution ahead of today’s much anticipated interest rate decision by the Federal Reserve. The euro and sterling edged up from two-week lows, while Canada’s dollar shadowed oil prices downward. The Fed kicks off three straight days of central bank decisions with Europe and Japan following on Thursday and Friday, policy announcements that could set the course for currencies over the balance of the summer. The Fed is widely expected to hike rates by 25 basis points to a range between 5.25% and 5.50% which would be the highest level in 22 years. Key for the dollar and its major peers will be where the Fed sets the bar for its next gathering in September. The Fed will have the luxury of viewing two more jobs reports and two more inflation surveys before it next meets on Sept 19-20. A Fed that sets an elevated bar for a rate hike, though one within reach, depending on coming data, could help the buck hold above its recent 2023 lows.
Euro halts 5-day slide
The euro snapped a 5-day slide that knocked it to two-week lows against the greenback as traders flattened out bets ahead of this week’s U.S. and European central bank policy decisions. Both the Fed and ECB are expected to raise rates by 25 basis points to roughly 5.38% and 3.75%, respectively. The euro would be susceptible to further downside risk if the ECB emphasizes weaker economic data of late and should refrain from doing what it has done at recent meetings which is raising the curtain on another hike when it next meets.
Sterling snaps losing streak
The UK pound stabilized after a 7-day tumble to two-week lows against the U.S. dollar, its longest skid since March 2020. The pound’s stretch of weakness toppled it from 15-month highs above 1.31 to just below 1.28. Sterling finds itself caught between the two opposing forces of expectations for continued rate hikes, which is pound-positive, and worries about the highest borrowing rates in years damaging economic growth, which is pound-negative.
Commodity currencies underperform
Commodity currencies were subdued, though rangebound, as oil prices moderated below $79, while cooler inflation Down Under added to the view that interest rates among dollar-bloc economies may have peaked. Australian consumer prices cooled to a 0.8% quarterly pace in the second quarter, the smallest increase in nearly two years, compared to forecasts of 1% from 1.4% in the first quarter. Canada last week posted the coolest inflation in 27 months when consumer prices rose at a 2.8% annual rate in June.
Dollar maintains upper hand for now
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: July 24-28
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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.
