Global overview
The U.S. dollar started the new week on a solid footing after it staged a data-induced fall on Friday. The buck scored modest gains against the euro, sterling, and Canadian dollar. The dollar tumbled Friday after U.S. job growth underwhelmed for the first time in more than a year when American employers added 209,000 jobs in June. The dollar fell despite other indicators showing lower unemployment and higher than expected wage growth. Friday’s U.S. jobs report was consistent with solid enough hiring to keep the economy growing and inflation cooling. The dollar tends to struggle when economic data suggests the Fed is closer to winding down its most aggressive rate hiking cycle since the 1980s. The spotlight this week will shine on American inflation, key data that speaks to the outlook for Fed policy. Consumer prices on Wednesday are forecast to cool for the 12th straight month in June to an annual pace of 3.1% from 4% in May. Core inflation is expected to remain more elevated at 5%. Ahead of the midweek inflation report, markets assigned a more than 90% chance of the Fed hiking rates by 25 basis points from roughly 5.1% on July 26.
Euro nears a 2-week top
A 3-week winning streak lifted EUR/USD Monday to nearly two-week highs. The euro held the upper hand after U.S. job growth Friday fell short of expectations for something stronger in the wake of surprisingly bullish labor market readings earlier last week. The euro is now hovering near higher ground that it has struggled to sustain over recent weeks. The bloc’s fragile economy has served as a bit of a rally capper for the euro. Germany’s ZEW survey of investor confidence, due Tuesday, is forecast to remain in negative territory for the third straight month.
Sterling backpedals from 14-month highs
The UK pound eased off the April 2022 high it reached Friday near 1.2850 against its U.S. rival. Wavering risk sentiment slowed the pound’s surge, along with caution ahead of key readings this week on the British economy. UK unemployment Tuesday is forecast to steady at 3.8% in the three months ending in May. But weakness is on the cards for Thursday surveys on monthly growth and factory output. Sterling stands to appreciate from the Bank of England’s hawkish rate outlook that has some forecasting peak rates around 6.5% from 5% currently. But the pound would be vulnerable to evidence of higher rates taking a toll on the economy.
C$ steadies ahead of midweek BOC decision
While Canada’s dollar dropped a second straight week against the greenback it was the latter currency that dropped from recent four-week peaks. Canada’s dollar was little changed to start a week in which many are betting on the Bank of Canada to raise interest rates for a second straight meeting. Forecasts suggest Ottawa Wednesday may lift its key lending rate to 5% from 4.75%. Upside for commodity-backed currencies was checked by fresh signs of a faltering Chinese economy. Chinese consumer inflation flatlined with a zero reading in June, spurring deflation worries in the world’s No. 2 economy.
Dollar knocked lower by slower hiring
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: July 10-14
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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.
