Global overview
The U.S. dollar and its main peers kept to confined ranges on the eve of data that will hint at whether the Federal Reserve has another interest rate hike on the table. Broader market sentiment was cautious, benefiting safer bets like the greenback and yen, after Chinese trade figures added to concerns about the pace of recovery in the world’s No. 2 economy. America Wednesday releases its April report on consumer inflation. Consumer prices are forecast to steady at an elevated 5% annual rate for a second straight month. Core, or underlying, inflation is expected to tick down to 5.5%. Coming on the heels of a generally hotter than expected jobs report last week, another reading of uncomfortably high inflation would keep the door open for the Fed to raise borrowing costs. The week’s other marquee event risks include a Bank of England interest rate meeting on Thursday and UK growth on Friday.
Euro hovers below peaks
The euro hovered below recent one-year peaks against the greenback as gains proved tougher to sustain after last week’s interest rate hike from the ECB. The ECB raised rates to 3.25%, the highest level in 15 years, but emphasized how its policy tightening so far – some 375 basis points since mid-2022 – were “forcefully” impacting the 20-country economy by curbing loan activity. Markets read that as a hint that the ECB may be further along its rate hiking journey than previously expected and that peak borrowing rates could fall short of recent estimates of around 3.75%.
Sterling steadies under 1-year high
A sturdier U.S. dollar, coupled with a more risk-averse global backdrop, put a brake on sterling as it steadied below its highest level in a year. Markets are betting on a near-certainty that the Bank of England Thursday will raise rates for a 12th straight time since December 2021 to 4.50% from 4.25%, as it redoubles its efforts to tame double-digit inflation. The pound has rallied on the view that the BOE could become the most hawkish central bank among the majors over the balance of the year. But any air of cautiousness from the BOE could spur the pound to surrender some of its gains.
C$ pares gain as global growth worries resurface
Canada’s dollar wavered below three-week highs against the U.S. dollar as oil moderated and data from China raised questions about the strength of global growth. Chinese imports unexpectedly contracted in April, the same month that exports slowed to an 8.5% increase after they expanded nearly 15% in March. A dearth of Canadian economic data this week has put the focus for the loonie on external drivers like global data. Worries about global growth pushed the price of oil below Monday’s close of $73.16.
Dollar steadies above its lows
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: May 8-12
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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.
