Global overview
A steady greenback was perched just below its highest level in two months in mostly central bank driven trade. European currencies were subdued with the UK pound and euro holding near the previous day’s seven- and 10-week lows, respectively. Canada’s dollar steadied in positive territory for the week. After racing to two-month highs Wednesday, the U.S. dollar lost steam as downbeat data from around the world helped to put a brake on soaring government bond yields. America’s influential 10-year Treasury note closed Wednesday below 4.20% after topping 4.30%, the highest since 2007, on Monday and Tuesday. Attention now shifts to the Fed’s Jackson Hole, Wyo., conference that will be attended by officials from the European Central Bank, the Bank of Japan, and the Bank of England. Key for markets and the greenback will be the tone the Fed chair strikes when he speaks Friday at 10 a.m. ET. A message from the Fed chair that the inflation fight isn’t over and may require another rate hike could inject new life into the dollar’s late summer surge.
ECB rate hike uncertainty weighs on euro
The euro remained subdued on the week and anchored near 10-week lows hit Wednesday after data the previous day suggested the European economy weakened further in August. The surprise contraction in both the German and euro zone service sectors in August were a troubling sign that manufacturing weakness has spread to other parts of the economy. The weak data led markets to materially scale back expectations for the ECB to hike rates when it issues its next decision on Sept 14.
Weak data leads to dovish repricing of UK rate outlook
Sterling positive forces were on display last week with elevated UK inflation pressures in focus. Attention this week has turned pound negative factors such as how the Bank of England’s more than a dozen consecutive interest rate hikes are showing increasing signs of slowing the UK economy. The Confederation of British Industry, or CBI, reported today that its survey of retail sales fell to minus 44 in August, the fastest fall since March 2021, from minus 25 in July. Sterling hit a seven-week low this week as markets revised down their estimate of peak UK interest rates to around 5.8% by February, compared to an early July projection of 6.5%.
USD/CAD eases below 1.36
Canada’s dollar largely treaded water above its lowest level in nearly three months against its U.S. rival. Worries about a China-led slowdown in global growth have pressured commodity-backed currencies this month with the C$ having shed about 2.5% versus the greenback month to date. A relative calm as the Fed’s three-day symposium of global central bankers got underway Thursday resulted in major currencies adhering to tighter ranges. Those ranges could be tested Friday when Fed Chair Powell and his counterparts from Europe and Japan speak, remarks that could hint at the immediate road ahead for monetary policy.
Dollar holds near 2-month highs
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Aug 21-25
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.
