Global overview
The greenback steadied above 15-month lows and was in line for its first weekly gain in almost a month. The buck largely treaded water ahead of fresh data on America’s job market. Consequently, the dollar kept above a 16-month low versus the euro, while sterling stuck near the previous day’s one-week low. Commodity currencies were buoyant after Australian jobs data surprised to the upside for a second time in as many months, boosting the Aussie, kiwi, and Canadian dollars. The U.S. dollar has had company on the FX market hot seat this week after the lowest UK inflation in more than a year led markets to scale back expectations for higher British interest rates. Moreover, the case has weakened for the Bank of England to tighten by a forceful 50 basis points in early August. As for the greenback, sentiment has dimmed on the view that the Fed is almost done hiking and that rate cuts could commence as soon as early 2024. Still, economic divergence has helped to slow the dollar’s descent with the U.S. economy flashing steady signs of resilience. The dollar should take some direction from U.S. weekly jobless claims today with forecasts calling for an uptick to 242,000 from the prior week’s 237,000.
Consolidation catches up with euro
The euro was little changed as consolidation took hold after its burst this week to late February 2022 peaks against its U.S. counterpart. EUR/USD is largely biding its time ahead of next week’s central bank meetings in the U.S. and euro zone that may shed important light on the trajectory of transatlantic monetary policy over the balance of the year. After flagging higher rates at its past few meetings, an ECB on July 27 that should refrain from signaling a strong likelihood of a tightening in the fall would leave some of the euro’s appreciation at risk.
Sterling’s surge cooled by inflation
The UK pound was pinned near one-week lows against the greenback and on track for a weekly decline of more than 2%. Sterling fell out of bed this week after the slowest British inflation in more than a year triggered a dovish repricing in UK interest rate expectations. Currently at 15-year highs of 5%, markets are less confident that London may need to push borrowing costs as high as 6% over coming months. Moreover, the BOE seems more inclined to slow the pace of increases to 25 basis point clips should inflation moderate further in the months ahead.
C$ boosted by Down Under cousin
Often what’s good for its commodity cousins is also good for the Canadian dollar. The loonie strengthened on the coattails of the Australian dollar, a currency that jumped nearly 1% after domestic hiring increased by 32,600 in June, more than double forecasts of 15,000, which depicted an open door for the Reserve Bank of Australia to hike lending rates. The C$ also has been buoyed of late by outperforming equity markets. A report on Canadian retail sales Friday is forecast to post growth of 0.5% in May from 1.1% in April as higher borrowing rates likely cooled spending.
Dollar edges off 2023 lows
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: July 17-21
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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.
