Global overview
A cautiously improved global market mood Wednesday led the safe bet greenback to pare some of its weekly gains. The euro edged up, though rivals from Britain and Canada were little changed, keeping the latter in the vicinity of early June lows hit Tuesday. For a second straight day, China released a batch of worrisome economic data as official figures showed the world’s second biggest economy slipped into deflation in July. Chinese consumer prices fell at an annual rate of 0.3% in July, the first subzero reading in more than two years, while wholesale inflation fell 4.4%, the 10th straight reading below zero. While the data heightened concerns about China’s economy, the breadth of the recent weakness has spurred hopes that Beijing may step up support measures. Meanwhile, demand for the U.S. dollar cooled ahead of a Thursday update on American inflation that markets will use to fine tune expectations for Fed policy. The dollar would be at risk of another data-induced setback should inflation surprise to the downside and show the Fed’s 10 rate hikes since early last year bearing more economic fruit.
Euro stabilizes as Italy backtracks on windfall tax
The euro was steady to firmer Wednesday as global market sentiment improved enough to temper safety demand for the greenback. Part of the improvement in market confidence stemmed from Italy whose government scaled back plans to tax bank profits, a move that had contributed to the global market slide on Tuesday. The euro remains on choppy near-term ground and will look for direction from America’s inflation report on Thursday. Cooler U.S. inflation, if realized, would likely lend the euro some traction to test key resistance above 1.10.
UK pound steadies ahead of transatlantic data
Sterling was little changed for the week thanks to a cautious uptick in market morale. Data this week from China has been so concerning that it’s leading markets to anticipate that Beijing may be compelled to deliver more stimulus to help stave off a bigger slowdown. Still, the tentatively improved market mood lacked conviction, keeping currencies on bumpy ground. Influential U.S.-UK event risks loom Thursday and Friday when the former issues key inflation data and the latter publishes fresh growth figures that will be parsed to see if Britain’s economy maintained its resilient run.
C$ moves off lows
Canada’s dollar steadied after sliding a day earlier to 1.35, its weakest level in more than two months against its U.S. counterpart. The loonie has been hamstrung of late by a run of weaker data at home and in China that, taken together, have been supportive of the view that domestic interest rates may have peaked at 5%. Still, the outlook for Bank of Canada policy remains fluid and will look for direction from Canada’s next inflation report on Aug 15 to see where prices veered after cooling to a 2.8% annual rate in June, the lowest level in 27 months.
Dollar pares gains ahead of U.S. inflation update
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Aug 7-11
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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.
