Global overview
The U.S. dollar fared mixed after it notched new highs against most of its main peers. The bucked steadied after climbing to June and July highs against the Canadian dollar and euro, respectively, and to 2023 peaks against the yen. The UK pound was little changed and on track to snap losing streak against the greenback. The dollar has found room to run over the past month as upbeat U.S. data highlights the resilience of the world’s biggest economy. The outlook for the world economy, meanwhile, has grown increasingly murky, led by persistent weakness in China, the world’s second-largest economy. As a result, the dollar is enjoying twin tailwinds as global weakness lends a safe harbor boost with solid U.S. fundamentals pushing Treasury yields higher. Moreover, the Fed this week released the minutes from its late July meeting when it raised rates for an 11th time since early 2022 to the highest level – roughly 5.38% – in 22 years. The Fed’s July notes also signaled a hesitancy yet for the central bank to abandon its tightening bias in the face of ‘significant’ upside risks to inflation. Today’s update on U.S. weekly jobless claims is forecast to show moderation to 240,000 from 248,000.
Euro hits lowest level in 6 weeks
The euro sank to six-week lows against the greenback as transatlantic data continued to cast the world’s biggest economy in a brighter light than Europe. Rising U.S. Treasury yields have added downward pressure on the euro, an increase that signals any cut to Fed borrowing rates is likely to happen later rather than sooner. Moreover, ongoing weakness in China depicts darkening clouds over Europe, a region that sends a significant amount of its exports to Asia.
Sterling buoyed by hot UK data
A tenacious UK pound kept above Monday’s 1 ½ month low against the greenback. Another batch of hot UK inflation and wage numbers this week were supportive of the Bank of England raising rates as many as several more times during a tightening cycle that has already proven the most rapid in a generation. Since December 2021, the BOE has raised rates 14 straight times to a level of 5.25%, the highest since February 2008. The pound would be at risk of unraveling some of its gains if UK retail sales Friday contract 0.5% as expected in July from a gain of 0.7% in June, an outcome that would thrust economic uncertainty to the forefront.
C$ falls to 11-week low
Canada’s dollar extended a slide to 11-week lows against the U.S. dollar with the pair topping 1.35. The loonie has largely fallen prey to global weakness that’s set off a bout of C$ negative risk aversion. The loonie’s latest leg lower means that USD/CAD has erased the lion’s share of its year-to-date losses, having ended last year near 1.3550. The loonie will look for direction today from U.S. indicators on the job market and from the tone on Wall Street which helps to guide risk sentiment. Anything that should excite Wall Street may do the same for the C$.
Dollar shadows U.S. Treasury yields higher
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Aug 14-18
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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.
