Global overview
The U.S. dollar steadied above two-week lows but was on pace for its second consecutive weekly decline. The dollar hovered near two-week lows against the euro and kept close to four-week lows versus rivals from Britain and Canada. The dollar lost ground this week following surprise interest rate hikes in Australia and Canada and after disappointing U.S. data spurred doubts about the need for the Federal Reserve to raise rates any further. Services growth stalled in May while weekly jobless claims jumped to the highest level since October 2021. The data cemented expectations for the Fed to delay its next rate hike from roughly 5.1%. The prospect of a status quo Fed next week against expectations for the European Central Bank to hike for the eighth straight meeting points to a narrowing in the buck’s yield advantage. The dollar was on track for a weekly decline of about 0.5% with its coming prospects likely to hinge on U.S. consumer prices on June 13 and the outcome of the Fed’s meeting the next day. Canada’s dollar was on course for a second straight weekly advance ahead of the country’s May jobs report.
Euro on pace for weekly rise
The euro was on track to snap a string of weekly losses against the greenback as disappointing data on the left side of the Atlantic injured the latter currency. The euro capitalized on downbeat U.S. data that validated concerns about a potential U.S. recession later this year. Should the world’s biggest economy lose significant momentum, it could spur the Fed to pivot to interest rate cuts. Moreover, expectations for the Fed next week to stand pat on policy while the ECB is forecast to hike points to a narrowing in the dollar’s favorable yield advantage versus euro-based assets.
Sterling poised for another weekly gain
An improved risk environment and a weaker U.S. dollar conspired to boost sterling to four-week highs (1.2570) on Friday. Central banks are under the microscope ahead of meetings next week in the U.S. and euro zone that will be followed by the UK on June 22. A spotlight on central banks tends to be bullish for the pound on the perception that the UK has more rate hikes on the table than its peers with Britain home to hotter inflation. Moreover, some central bank watchers are penciling in UK interest rates, currently at 2008 highs of 4.50%, to top out above U.S. rates of roughly 5.1% at present.
Canada unexpectedly shed 17,300 jobs in May
The Canadian dollar fell from one-month highs (1.3315) after disappointing domestic jobs data cast doubt on further interest rate hikes. Canada unexpectedly shed 17,300 jobs in May compared to forecasts of an increase of 23,200. The hiring contraction, the first in nine months, pushed unemployment up to 5.2% from 5.0%. A closer look at the data showed that wage growth ticked down to 5.1%, while the size of the workforce declined. On balance, the data offered evidence of Canada’s 450 basis points of cumulative rate hikes since March 2022 cooling the tight labor market.
Dollar index on track for 2nd straight weekly decline
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Jun 5-9
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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.
