Global overview
A bruised and battered U.S. dollar slipped to fresh lows after a pair of underwhelming readings on the world’s biggest economy suggested Fed borrowing rates were closer to peaking. The buck’s swoon knocked it to more than one-year lows against the euro and sterling and to its weakest in eight years against the Swiss franc and Mexican peso. Canada’s dollar held aloft near multiweek highs after the Bank of Canada raised its key rate this week to 5%, the highest in 22 years. Dollar sentiment darkened after the latest jobs and inflation figures underwhelmed. That was a signal to markets that an anticipated hike in U.S. lending rates in less than two weeks might be the latest of the Fed’s most aggressive tightening cycle since the 1980s. Markets cheering the view that the Fed is almost done has weighed further on the safe harbor buck by whetting appetite for risk. Should U.S. numbers today on weekly jobless claims and producer price inflation back the case for the Fed to halt rate hikes sooner rather than later it could heap more pressure on the buck.
Euro soars to March 2022 high
The euro shot to its highest level in nearly 16 months against its battered U.S. rival after American inflation slowed to a 3% annual rate in June, the lowest level in more than two years, good news that backed the case for the Fed to soon halt interest rate hikes. The euro stands to gain from any market repricing of fewer U.S. rate hikes, particularly with the ECB expected to press ahead with policy tightening over coming months with inflation across the 20-country bloc running hotter at 5.5%.
Sterling finally tops 1.30
The UK pound halted a prolonged stretch below 1.30 against its U.S. peer as it found a bullish catalyst in the coolest American inflation since early 2021. Sterling finally hopped above 1.30 after U.S. consumer inflation moderated more than expected to a 3% annual pace in June. The news came on the heels of slower than expected U.S. hiring in June that, taken together, suggested the Fed may halt its hiking campaign after July. Meanwhile, data today confirmed the UK economy contracted 0.1% in May. But weak growth for now continues to be overshadowed by strong British inflation that has some anticipating another half-point hike by London in early August.
C$ posts July highs
A trio of bullish forces converged to push the Canadian dollar to July highs and its strongest level in two weeks. Cooler U.S. inflation hammered the greenback, boosting the loonie, a currency that also found support from the Bank of Canada raising rates to 5% from 4.75%, a 22-year high. Markets in rally mode on hopes that the Fed may wind down rate hikes sooner rather than later has also been positive for the commodity-linked loonie. Should Canadian data next week on inflation (July 18) and consumer spending (July 21) keep the door open to BOC rate hikes, USD/CAD may soon test key support at 1.30.
Dollar hammered by underwhelming data
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.
