Global overview
The greenback was steady following a U.S. holiday with investment sentiment sullied by global growth concerns. The risk-off tone underpinned safer bets like the dollar and yen, while commodity currencies like the Canadian dollar wilted. The euro and sterling kept in negative territory for the week. China’s economy, the world’s second largest, remains a concern after a report on its services industry posted weaker than expected growth. Markets also are treading cautiously ahead of the minutes from the last Fed meeting, due today, and ahead of Friday’s crucial snapshot of America’s job market. This week’s events are likely to hint at the extent to which U.S. interest rates need to raise to tame high inflation. Forecasts suggest U.S. hiring cooled to 225,000 in June from May’s increase of 339,000. While unemployment is expected to tick down to 3.6%, any surprise increase would not come as a total shock, a scenario that would hint at fewer rate hikes ahead rather than more.
Euro turns negative for the week
The euro was little changed, albeit with a softer bias, as risk-off sentiment worked in the favor of safer plays like the dollar and yen. Meanwhile, downbeat data from China and Europe also didn’t help the euro. Euro zone services growth was unexpectedly revised lower in June to 52.0 from an initial estimate of 52.4, while producer prices, a gauge of wholesale inflation, contracted at an annual rate of 1.5% in May from a downwardly revised 0.9% increase in April. Steady signs of moderating euro area inflation suggest ECB lending rates could peak at lower levels.
Sterling vacillates around 1.27
Sterling struggled to keep afloat as markets returned from the U.S. holiday break in risk-off mode due to fresh worries about a moderating Chinese recovery. The pound often underperforms against safer peers like the greenback when optimism about global growth deteriorates. Sterling is mostly taking its cues this week from prevailing risk sentiment, given a lack of much meaningful data on the UK front. Britain next week issues big ticket numbers on unemployment and economic growth.
USD/CAD pops to 3-week highs
Commodity currencies sputtered Wednesday as worries about a weaker Chinese economy knocked the Canadian dollar to three-week lows. Canada’s jobs report Friday looms large for the loonie and the outlook for domestic borrowing rates. Hiring is forecast to bounce back with an increase of 20,000 in June after contracting in May. But unemployment is expected to rise to 5.3% from 5.2%. The loonie could rebound if Canada posts another solid job gain, a scenario that would support the case for higher lending rates from 4.75%, already a 22-year high.
Dollar in vogue as data casts a pall over global economy
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: July 3-7
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.
