Global overview
The U.S. dollar moved below two-month highs versus a basket of currencies as market sentiment perked up to begin the new week. As a result, the dollar edged below recent June peaks against the British pound and Canadian dollar, while the euro firmed above its lowest level since July. The dollar is riding a five-week winning streak, its longest in more than a year, boosted by America’s resilient economy. How the buck ultimately fares this week may hinge on a speech Friday by Federal Reserve Chair Jerome Powell at the central bank’s summer conference in Jackson Hole, Wyo. A Fed boss that emphasizes that the fight against inflation isn’t over would tend to strike a dollar-positive note. However, a balanced message where Mr. Powell notes progress toward lowering inflation back to the central bank’s 2% goal would hint at the end in sight for rate hikes, a less hawkish stance that could check the dollar’s rise. Mr. Powell is due to speak Friday at 10:05 a.m. ET. China cut interest rates by a smaller than expected 10 basis points to 3.45% for one-year loans.
Euro bounces ahead of key data
The euro bounced above Friday’s six-week low against the dollar (1.0843), as it caught a tentative boost from improved risk tolerance with global stocks mostly kicking off the new week on their front foot. Improved risk sentiment tends to temper demand for safer bets like the greenback, the world’s most liquid currency. European sentiment surveys will help guide the euro over the coming week, particularly Germany’s influential Ifo index of business confidence on Friday that fell for a third straight month in July.
Sterling holds firm after snapping weekly skid
Sterling held firm after it snapped a four-week slide against the greenback last week. The pound rallied after data showed UK inflation remained elevated even though it cooled to an annual rate of 6.8% in July, the lowest in 17 months, from 7.9% in June. Elevated inflation keeps the Bank of England on track to raise rates from 5.25%, the highest in 15 years, over the coming months which is pound positive. For August, GBP/USD remained in a hole after ending July at 1.2850.
C$ rises above 2 ½ month low
Canada’s dollar has been held hostage of late to the prevailing level of global risk sentiment. That was a good thing Monday as most global equities kicked off the week on their front foot, buoying commodity-backed currencies. The Canadian consumer looms large in the week ahead with a Wednesday survey on retail sales. Consumption is forecast to flatline in June amid a backdrop of unemployment creeping higher and the Bank of Canada raising lending rates to 5%, the highest in 22 years.
Dollar softens after surging to 2-month highs
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Aug 21-25
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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.
