Global overview
A woozy greenback continued to nurse a data-induced hangover as it slipped to two-month lows against a basket of rivals, while sterling vaulted to 2023 highs. Dollar weakness lifted the Canadian dollar to one-week highs and the yen to three-week peaks. The euro jumped to its highest in more than two months. Sentiment toward the dollar suffered a blow after hiring over recent months proved lighter than expected. Markets also are looking ahead to an update on U.S. inflation Wednesday that’s forecast to extend a cooling trend. Consequently, the world’s largest economy appears to be evolving in a way that may allow the Fed to slow the pace of rate increases and halt them before long. While sentiment has turned against the dollar for now, its immediate prospects may ride on U.S. consumer inflation. A marked cooldown in prices could add traction to the dollar’s decline while an upside surprise may offer it a helping hand higher, an outcome that would highlight how the Fed may have to raise rates beyond this month.
Euro jumps to 2-month highs
A weaker U.S. dollar lit a fire under the euro as it climbed above 1.10 to its highest level in two months. A prevailing theme of dollar weakness allowed the euro to sidestep more worrisome news on the bloc’s largest economy. German investor morale, according to the influential ZEW survey, dimmed more than expected to minus 14.7 in July, a print weaker than forecasts of minus 10.5 from minus 8.5 in June. The German economy, which tipped into recession earlier this year, continues to endure twin headwinds from the highest lending rates in decades and a weaker global economy that’s dampened demand for European exports.
Sterling vaults to 2023 peaks
The UK pound galloped to 14-month highs after mixed data on Britain’s job market increased pressure on the Bank of England to raise rates. GBP/USD topped 1.29, its highest since April 2022. UK wage growth, a focal point of the London’s hawkish rate outlook, tied all-time highs by accelerating at a 7.3% pace over the three months ending in May. It wasn’t all bullish news for sterling, however, as British unemployment unexpectedly rose to 4% versus expectations to remain at 3.8%. For now, sterling can do little wrong amid markets’ focus on central bank policy divergence that’s pressuring the greenback on the perception that the Fed is almost done tightening while UK rates may have a lot higher to climb from 5%.
C$ strengthens ahead of midweek BOC decision
A broadly weaker U.S. dollar boosted Canada’s currency to its highest level in a week. Loonie sentiment also was supported by expectations that the Bank of Canada could raise interest rates Wednesday for the 10th time since it embarked on its aggressive tightening campaign in March 2022. The C$ has been underpinned by higher interest rates in Canada that, at 4.75%, are the highest in 22 years. Still, USD/CAD enjoyed a modest monthly gain as concerns about moderating global growth dragged on commodity-backed currencies.
Dollar sinks to cellar of weekly ranges
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.
