Global overview
After climbing overnight to nearly two-week highs, the U.S. dollar steadied on caution as Federal Reserve policymakers gather for a two-day meeting. The euro and sterling were subdued near multiweek lows while Canada dollar’s maintained a firm bias after China pledged to redouble stimulus to revive its anemic recovery. The dollar has recovered from recent 15-month lows thanks to mounting signs of a sturdy U.S. economy. That’s been enough to buoy the dollar as solid U.S. data has contrasted a picture of weakness abroad. The Fed this week is widely expected to deliver its 11th rate hike since early 2022, a quarter-point bump to a range of 5.25% to 5.50%. This week’s U.S. rate hike could be the last one for a while with inflation on a moderating path. Yet doubts remain about when the Fed will officially ditch its tightening bias, given that inflation remains elevated. Adding to the cautionary market backdrop are other central bank decisions this week in Europe and Japan.
German confidence heads south
The euro slipped below 1.1050 against the U.S. dollar, its lowest level in nearly two weeks. The euro has erased the bulk of its gains that were triggered by the tamest U.S. inflation in more than two years. That’s partly because of a steady parade of underwhelming data from the bloc’s main growth engine, Germany. The latest disappointment arrived today as Germany’s influential Ifo survey of business confidence deteriorated more than expected in July (87.3 vs forecast of 88.0 from a revised 88.6) and posted the third decline in as many months.
Sterling anchored near 2-week bottom
A subdued UK pound favored the previous day’s two-week low when it tipped just below 1.28 versus the U.S. dollar. Sterling remained about 1% stronger for the month but its strength has been eroded as disinflation starts to take hold in Britain. Cooler inflation has led markets to scale back expectations for how high central bankers may need to hike borrowing rates with some forecasting a peak below 6% from 5% currently.
C$ steadies ahead of Fed announcement
Canada’s dollar kept to a tight range against its U.S. counterpart on the eve of a Federal Reserve policy decision. USD/CAD was rangebound as a Fed rate hike this week was considered a near certainty yet the outlook for U.S. borrowing rates remained anything but certain. The same applies for Canada whose central bank appeared more likely to pause in September after back-to-back hikes in June and July raised rates to 22-year peaks of 5%.
Dollar rides resilient U.S. economy higher
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: July 24-28
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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.
