Federal Reserve

Sept. 21, 2018 (Western Union Business Solutions) – Solid gains against sterling helped the U.S. dollar bounce above multi-month lows. The greenback jumped the better part of 1% against the U.K. pound after an EU summit failed to make progress on Brexit negotiations, increasing the threat of a no-deal scenario that would spell heightened uncertainty for the British economy. The dollar also firmed against the euro and notched new two-month peaks against the yen. Canada’s dollar hovered near but below three-month peaks ahead of influential data today on domestic inflation and consumer spending. While firmer Friday, underlying sentiment has cooled toward the dollar as a moderation in trade war fears has tempered appetite for safer bets while some see the end of the Fed’s interest rate hiking cycle coming into focus after a series of increases since late 2015. The Fed’s Sept. 26 policy decision will be the focal point of a busy week ahead.

 

EUR

 

The euro softened after extending a rally above a key number to its highest in three months against the U.S. dollar. Receding fears of a global trade war have been a boon for the euro and a burden for the dollar as it’s catalyzed a bout of risk-taking which tempered investor appetite for safety and security in currencies like the dollar and yen. Data Friday showing weaker than expected factory growth in big economy Germany and the wider euro zone proved an excuse to book profit on the euro’s rise to June highs.

 

CAD

 

Canada’s dollar firmed toward three-month highs after the country’s economy seemingly put the fork in expectations for a local interest rate hike. Headline inflation cooled to an annual rate of 2.8% in August from 3% while one of the measures of core inflation that the Bank of Canada watches increased to 2% from 1.9%. Retail sales rose by 0.3% in July which was slightly under forecast though it helped that the previous reading got revised to a slightly smaller decline. On balance, the data were consistent with an economy that could use an inflation-checking rate hike to 1.75% from 1.50% at central bankers’ coming meeting on Oct. 24. Today’s data suggests that the upturn in the Canadian dollar to June highs is for real – at least ahead of the Fed next week.

 

JPY

 

The yen extended its descent to fresh two-month lows against the dollar as trade war tensions cooled and U.S. Treasury yields climbed. The yield on the benchmark 10-year Treasury rose further above the key 3% level that’s proven tough to sustain over recent months. U.S. yields are rising in the runup to next week when the Fed is expected to raise interest rates to 2.25% from 2% and keep the door open to another move in December and more in 2019.

 

GBP

 

Sterling led losses against the greenback Friday after an EU summit failed to make progress on Brexit with the parties continuing to squabble over a backstop for the Irish border which straddles Northern Ireland which is part of the U.K. and Ireland, a member of the EU. The less than congenial summit also added to an uncertain political backdrop on Britain where members of Prime Minister Theresa May’s Conservative party could still pursue a leadership change given the lack of meaningful progress on Brexit.

 

MXN

 

Mexico’s peso and most emerging markets came up for air Friday after staging a solid rebound in the wake of the dollar’s decline to three-month lows. The firmer dollar Friday put a brake on the EM rally. Yet EM currencies may have formed a tentative bottom thanks to proactive moves by area central banks, such as Turkey’s, to raise interest rates to help tackle high inflation and shore up their tattered currencies. Still, EM currencies could see renewed volatility next week, particularly if the Fed delivers a widely expected rate hike and should flag a faster pace of future increases to keep the strong U.S. economy from overheating.

 

USD

 

The dollar rebounded a bit from multimonth lows, but its underlying bias remained fragile. That’s because worries about a global economy-rattling trade war have moderated, diminishing safety flows into the U.S. unit while some are erring on the side of caution ahead of next week’s Fed meeting. While the Fed is all but certain to raise rates to 2.25% from 2% and keep the door unlocked to a December increase, the outlook for rate increases in 2019 is less certain. The Fed could signal that, after a series of rate increases since late 2015, it’s nearing the end of its rate rising rope, having raised rates at nearly every other meeting since late 2015. A less than hawkish outlook for rates next week would leave the dollar at risk of further losses.


USA 

Sept. 20, 2018 (Western Union Business Solutions) – The U.S. dollar crashed to new lows as it deepened a September slide. The mostly weaker dollar slipped to fresh multiweek lows against the euro and Canadian dollar and fell to its weakest in two months against the data-powered British pound. An easing in global risks has kicked away a leg of support for the safer U.S. currency. While the U.S. and China stepped up their trade quarrel this week, the modest tariff increases were considered less draconian than expected and thus likely to have only a muted impact on global growth. Sterling soared more than a percent to mid-July highs after unexpectedly bullish U.K. retail sales depicted a resilient consumer, a positive sign for third quarter growth. Oil near recent multimonth peaks above $71 buoyed Canada’s commodity dollar. Also in focus today: central bank decisions in Norway, Switzerland and South Africa, an EU Brexit summit, and a slew of U.S. data.

 

GBP

 

Sterling soared to 2 ½ month peaks on a somewhat rare of late double-dose of optimism on Brexit and the U.K. economy. Retails sales unexpectedly rose with a 0.3% increase in August while the July reading got upgraded to nearly 1%. The spending splurge bodes well for faster growth during the third quarter. Meanwhile, Brexit parties are meeting today with hope intact for officials to move toward a trade deal before long.

 

CAD

 

Canada’s dollar flirted with three-month highs on the back of buoyant oil markets and the flimsy greenback. Oil topped $71, one of the highest levels in two months. Mix in cautious optimism about Nafta negotiations in Washington and solid Canadian data this week making a stronger case for an imminent rise in area borrowing rates and it’s no surprise to see the loonie gain traction. Those gains will be tested Friday in northern numbers on inflation and retail sales. A solid set of data, which is generally on the cards, would all but cement a rate hike to 1.75% from 1.50% on Oct. 24, the next Bank of Canada meeting.

 

AUD

 

The Aussie dollar appreciated to three-week peaks as global risks abated as markets took the latest match of tariff tennis between Washington and Beijing in stride. Antipodean currencies also basked in the afterglow of stronger than expected second quarter growth from neighboring New Zealand whose economy expanded at a 1% rate, an amount two times faster than the 0.5% pace during the first quarter. Still, tepid fundamentals point to longer run headwinds on both the Aussie and kiwi on the perception that their respective central banks are a long way from raising interest rates from historic lows.

 

USD

 

Stronger than expected U.S. data helped to slow the dollar’s bleeding. Weekly jobless claims unexpectedly improved, hitting a new low of 201,000 the healthiest since the late 1960s. The Philly Fed index showed faster than expected growth. The numbers continued to bark a familiar refrain of a strong U.S. economy that could lead the Fed to accelerate the pace of rate hikes which is positive for the buck and could help to slow its weekslong descent.

 

EUR

 

The euro pushed to 2 ½ month highs as the descended to new lows. The euro largely benefited from the greenback’s retreat while it enjoyed spillover support from sterling strength against the buck. While the euro has inched higher over recent days, it’s struggled to close above key thresholds. Nevertheless, the euro’s power play today bodes better for its technical prospects.

 

NOK

 

Norway’s krone fell broadly, even against the weaker greenback, after the nation’s central bank deployed a ‘dovish’ rate hike. The Norges Bank raised its benchmark rate to 0.75% from 0.50% but it sketched a slower pace of rate increases in the months ahead which disappointed Norwegian bulls. Consequently, the greenback rebounded above 7-week lows hit this week.

Sept. 17, 2018 (Western Union Business Solutions) – The U.S. dollar slipped toward multi-week lows as trade tensions dominated, pushing to the side optimism over the world’s biggest economy. The dollar weakened toward two- and six-week lows against the euro and sterling but was mostly steady versus counterparts from Japan and Canada. Media reports indicated a likelihood of the U.S. slapping more tariffs on imports from China as soon as this week, a move that could lead Beijing to cancel plans to meet with U.S. officials later this month. Trade friction overshadowed bullish U.S. news last week on the consumer showing solid spending and upbeat attitudes that pointed to strong growth over the summer quarter. The market also seems inclined to lock in dollar gains made since the spring ahead of next week when the Federal Reserve meets and is expected to raise interest rates for the third time this year.

 

USD

 

The dollar teed off the week on its back foot as trade tensions overshadowed a generally bullish set of U.S. data Friday on the economy-driving consumer. The market also seems inclined to book some profit on the trade-weighted dollar’s gains of about 5% since April. Low unemployment below 4% looms as an upside risk to inflation, a scenario that has the market pricing a more than 90% likelihood of the Fed raising rates next week to 2.25% from 2%. The Fed’s new forecasts, which it will unveil next week, will be important for the dollar’s coming prospects.

 

JPY

 

The yen kept near a seven-week bottom against the greenback with USDJPY taking its main cue from yield differentials. America’s 10-year Treasury topping 3% underpinned the buck against its lower yielding Japanese rival. Meanwhile, the Bank of Japan this week meets and its expected to leave its base lending below zero when it renders its policy decision Wednesday. Japan is not expected to join the Fed in normalizing monetary policy for a while yet, a factor that serves as an underlying headwind on the yen. By Contrast, a U.S. rate hike is considered a near certainty next week.

 

CAD

 

Buoyant oil prices near $70 offered support to Canada’s commodity-influenced currency. Canada’s economy will be in the limelight with data Friday on consumer inflation and retail sales. The data, if solid like the forecasts expect, could put an imminent rate hike more firmly on the table and buoy the Canadian dollar. Ahead of the late week numbers, markets were pricing about a 70% likelihood of a rate increase to 1.75% from 1.50% when bankers next meet on Oct. 24.

 

EUR

 

The euro firmed toward late August highs against the dollar, helped by data confirming higher overall inflation in the euro zone last month which validated ECB confidence in the outlook for price growth. Data confirmed that euro zone inflation rose at an annual rate of 2% in August, which just topped the central bank’s target of being a whisker below that level. However, the less volatile core gauge of inflation grew at a subdued rate of 1%, a low level that keeps an ECB interest rate hike on a distant horizon.

 

GBP

 

Sterling pushed to within reach of seven-week peaks. The pound kept on elevated terrain as the latest Brexit headlines have sounded a constructive tone, bolstering expectations for Britain and the EU to eventually reach a pound-positive trade deal as soon as the weeks ahead. Fundamentals will help impact the pound with U.K. data Wednesday on inflation and Thursday on consumer spending. Forecasts call for inflation to continue its moderating trend while modest contraction is on the cards for retail sales. Lower inflation and weaker spending would reinforce the low rate outlook for Britain, a scenario that could leave sterling vulnerable.

Sept. 6, 2018 (Western Union Business Solutions) – The dollar came under pressure on mixed data showing benign inflation and strong job growth. Core consumer prices rose at an annual rate of 2.2% in August, down from 2.4% in July. Weekly jobless claims unexpectedly declined by a thousand to a healthy 204,000. The overall robust set of data keeps the Fed on track for a rate hike when it announces its next decision on Sept. 26.

 

CAD

 

The loonie was little changed after flirting with two-week highs this week. Oil prices backpedaled from two-month peaks above $71, the main force behind the commodity-linked currencies tepid tone Thursday. Reports of constructive Nafta negotiations have also been loonie-positive. Downside appears limited for Canada’s currency, given the prevailing view of area interest rates rising from 1.50% as soon as next month.

 

GBP

 

Sterling rose to six-week highs after the Bank of England left interest rates unchanged at 0.75%. The BOE’s statement flagged higher uncertainty related to Brexit which hinted at borrowing rates remaining low over the foreseeable future, a dovish outlook when weighed against the rate rising U.S. central bank. Sterling continues to hover toward the north end of its range on the notion that Britain and the EU might be on a somewhat faster track to a trade deal.

 

EUR

 

The euro strengthened to two-week highs after the ECB left policy unchanged and set the stage for the central bank to end its monthly bond buying stimulus at the end of the year. The ECB will halve its monthly bond buys from €30 billion to €15 billion starting in October with plans, economy-permitting, to conclude the program at the end of 2018. The bank’s new forecasts showed only modest downward revisions to 2018 growth (2.0% vs 2.1%) while it left unchanged its outlook for inflation to grow at a 1.7% pace this year and over coming years. Mr. Draghi voicing confidence in inflation eventually meeting its near 2% goal was well received by euro bulls who bid the single currency higher.

 

AUD

 

The Aussie dollar recovered from 2 ½ year lows, finding helping hands on the nation’s job market and a reduction in U.S.-China trade tensions. Australia added 44,000 jobs last month that were mostly the more meaningful full-time positions which easily exceeded forecasts of a gain of 15,000. Faster hiring didn’t impact unemployment which remained at 5.3%. Washington invited Beijing back to the negotiating table, a development that’s helped to temper concerns about a potential world economy-squeezing trade war.

Sept. 6, 2018 (Western Union Business Solutions) – The U.S. dollar was mostly flat as declines versus the euro, sterling and Norwegian crown offset gains against the Swiss franc and Australian dollar. Canada’s dollar hovered near late July lows with firmer oil above $68 helping to slow its descent. Market players are cautiously dipping a top into riskier waters, partly on signs that Italy might pursue fiscal prudence when Rome releases its 2019 budget in coming weeks. Easing concerns about the fiscal shape of the euro zone’s third biggest economy helped to eclipse ongoing trade war concerns that have rattled markets. Norway’s crown was a session standout performer after hotter than expected area inflation increased the risk of an interest rate hike from 0.50% next week. While steady, the greenback retained a bullish bias after strong U.S. jobs data last week validated Fed plans to raise interest rates a few more times this year.

 

GBP

 

Sterling firmed as it built on last week’s gain that came from reduced uncertainty related to Brexit. While Brexit remains a source of uncertainty for the pound, optimism is cautiously on the rise that Britain and the EU might ultimately find enough middle ground to agree on a trade deal in time to avert a potentially disorderly divorce. Sterling’s nascent upturn could hinge on U.K. unemployment data Tuesday and Thursday when the Bank of England issues a policy decision. No change in rates from 0.75% is expected but the tone of the central bank minutes could impact the pound.

 

USD

 

The greenback was mostly flat after a jobs-inspired rally Friday. Dollar fundamentals remains bullish after data showed the U.S. economy added more than 200,000 jobs in August while unemployment kept below 4% and the nearly 3% rise in wages marked the fastest pace in years. The data cemented expectations for the Fed to raise rates to 2.25% from 2% on Sept. 26 and keep the door wide open for further increases in December and 2019. The buck this week will take its cues from consumer prices Thursday and retail sales Friday.

 

CAD

 

Canada’s dollar underperformed and kept within arm’s reach of late July lows. The loonie lost ground after disappointing jobs data last week somewhat clouded the outlook for an imminent rise in domestic interest rates from 1.50%. Canada unexpectedly shed more than 50,000 jobs in August. But the fact that all the job losses came from less meaningful part time positions didn’t torpedo prospects of a rate hike to 1.75% as soon as Oct. 24.

 

EUR

 

The euro firmed after an overnight flirt with three-week lows. The euro bounced above multiweek lows on signs that Italy’s new coalition government would respect EU rules when it unveils its budget for next year some time over the coming weeks. Consequently, government borrowing costs declined, a sign of decreased investor worry that supported the euro. The ECB issues a decision Thursday. While area borrowing rates are expected to remain anchored at zero well into 2019, the central bank’s assessment of the growth outlook, if brighter, could be positive for the euro.

 

CHF

 

A 0.5% decline in the Swiss franc pulled the Alpine currency down from 5-month peaks hit last week. Haven assets are underperforming their riskier counterparts, like stocks, partly on diminished concerns about fiscal uncertainty in Italy, the euro zone’s No. 3 economy. Downside for the swissie could prove modest given persistent worries about a global trade war.

Sept. 6, 2018 (Western Union Business Solutions) – The dollar turned broadly positive after America’s jobs report surprised to the upside and showed the fastest wage growth in years, an outcome that put more U.S. rate hikes more firmly on the table. America added 201,000 jobs in August, a marked acceleration in hiring from a revised increase of 147,000 in July. Unemployment steadied at 3.9%. What stole the show for the dollar was the 2.9% annual rise in wages, a print consistent with inflation exceeding the Fed’s optimal rate of 2%. As a result, the Fed is all but certain to raise rates on Sept. 26 and likely again on Dec. 19. Bullish fundamentals, coupled with rising trade war fears, could prove a cocktail of U.S. dollar outperformance. Next week brings U.S. consumer inflation on Sept. 13 and retail sales the following day.

 

EUR

 

The euro was very little changed on the day and for the week against the dollar with few staking big bets ahead of America’s monthly jobs report. Italian-related headwinds on the euro subsided this week on signs that Rome’s new coalition government might play by the fiscal rules when it unveils its 2019 budget over coming weeks. Next week looms potentially large for the euro when the ECB issues a policy decision on Sept. 13. The central bank has seemingly ruled out a rate hike this year, putting the focus on officials’ level of confidence in the 19-nation economy. An upbeat assessment despite trade uncertainties would risk pushing the euro higher over the short run.

 

GBP

 

Sterling popped to one-week highs ahead of America’s influential jobs report, underpinned by cautious optimism in the U.K. and EU eventually sorting out their differences to reach a trade deal that helps to avert a hard, economy-squeezing exit from the bloc next year. While U.K. data was mixed this week, the most important indicator – services growth – showed a faster pace of expansion. While the news is unlikely to allow the Bank of England, which meets on Sept. 13, to contemplate an imminent rate hike from 0.75%, it was enough to temper negative sentiment toward the pound. Data on Sept. 11 will offer an update on U.K. unemployment whose 4% rate is the lowest in four decades and a source of sterling strength.

 

AUD

 

The rally in the U.S. dollar is alive and well versus its Australian counterpart which tumbled to 2 ½ year lows. The Aussie has been plagued by rising fears of the U.S. and China heading for a full-blown trade war. That spells bad news for Australia’s economy as it relies on global commerce as a chief growth engine. Moreover, expectations for U.S. and Australian interest rate differentials to widen further in the former’s favor is another source of negativity for the Aussie, particularly after the Reserve Bank of Australia this week flagged low rates for longer. Australia’s job market will be in focus next week. If unemployment on Sept. 13 holds around 6-year lows of 5.3% it could help spark a recovery in the Aussie.

 

CAD

 

Canada’s dollar turned lower after a dismal August jobs report made an October rate hike less likely. Canada shed more than 50,000 jobs in August which compared to forecasts of a modest gain (5K) which pushed up unemployment to 6% from a four-decade low of 5.8%. While all the job losses came from less desirable part time hires, wage gains moderated to a 2.6% annual rate from 3% in July, reinforcing the report’s weaker tone. The Bank of Canada this week reaffirmed that data hold the keys to the policy outlook. Consequently, today’s influential jobs report will deal a blow to expectations of an Oct. 24 rate increase to 1.75%, which is loonie-negative. Nevertheless, any constructive news on Nafta negotiations should help to slow the loonie’s jobs-induced descent.

 

 

Sept. 6, 2018 (Western Union Business Solutions) – The U.S. dollar retreated from multiweek highs as big rivals from Europe staged a recovery. The dollar softened below two-week highs and surrendered gains after powering this week to its highest in two years versus counterparts from Australia and South Africa. The recent rout in emerging markets subsided, allowing the Mexican peso to stabilize above two-month lows. Headwinds on the euro and sterling have shown signs of abating. Italy appears less inclined to ramp up deficit spending, a stance that has eased pressure on the nation’s bond yields, making government borrowing more affordable. In Britain, the latest headlines on Brexit have sounded cautiously optimistic about the nation eventually striking a trade agreement with the EU that would allow it to avoid a potentially economy-damaging exit from the bloc. Downside for the U.S. currency appears limited given ongoing trade war concerns. U.S. numbers today on jobs and services growth could potentially foreshadow tomorrow’s nonfarm payrolls report.

 

GBP

 

Sterling catapulted above two-week lows on reports that Britain and Germany had softened their demands for a Brexit deal for the former. While Germany reportedly refuted the news, it gave nascent rise to hopes that Britain would eventually reach an uncertainty-reducing trade deal in time before its planned exit from the bloc in March 2019.

 

CAD

 

Canada’s dollar steadied above 6-week lows as it looked for direction from U.S.-Canada trade talks in Washington. The loonie registered little more than a yawn Wednesday after the Bank of Canada left interest rates at 1.50% as expected and issued a largely status quo statement that flagged higher rates and elevated uncertainties with respect to Nafta negotiations. The market currently sees a more than 50% likelihood of the BOC raising rates to 1.75% when it next meets on Oct. 24. But much should hinge on Nafta and coming data like Friday’s Canadian jobs report that’s forecast to show an uptick in unemployment to a still low 5.9% for August.

 

EUR

 

The euro rose above two-week lows as it largely shadowed sterling higher. Meanwhile, concerns about the indebted state of Italian finances have moderated on signs the new coalition government in Rome is reconsidering plans to blow out the budget with deficit spending. That’s allowed Italian government borrowing rates to decline. Upside traction may prove limited for the euro after German data disappointed and showed a surprise plunge of nearly 1% in industrial orders in July, evidence that trade war uncertainties have impacted the real economy.

 

USD

 

The dollar favored session lows after mixed news on America’s job market. On the bright side, weekly jobless claims unexpectedly improved, hitting the lowest in nearly 50 years of 203,000. But another survey by payrolls firm ADP raised questions about the sustainability of the U.S. economy’s bull run. The ADP survey showed a big drop off in hiring in August to 163,000 from an increase of 219,000 in July. The latter report potentially foreshadows an underwhelming nonfarm payrolls jobs report Friday.

 

Sept. 4, 2018 (Western Union Business Solutions) – The U.S. dollar dashed out of the gates to a new month as a familiar them continued to unnerve markets: fears of a global trade war. The buck posted across the board gains with the biggest coming against export-reliant emerging markets. Mexico’s peso hit two-month lows while South Africa’s rand flirted with two-year lows. European currencies struggled with the euro and sterling hitting more than one-week lows. Canada’s dollar slipped to more than two-week lows despite a 2% rally in oil to above $71. This is the week that the U.S. could slap another round of tariffs of $200 billion on China. It’s also the week that the U.S. economy will release important data that could keep the Fed on a higher rate path over the rest of the year. America will release manufacturing data today, trade tomorrow and the granddaddy of them all: nonfarm payrolls on Friday.

 

CAD

 

The Canadian dollar returned from a long holiday weekend at its lowest in 2 ½ weeks. The coming week is chock-full of risk events with the Bank of Canada rendering an interest rate decision Wednesday, the same day that the U.S. and Canada are expected to return to the Nafta negotiating table. Data on trade and employment are also due this week. Of fundamental importance will be the BOC which is forecast to leave interest rates parked at 1.50% given trade uncertainties and news last week that Canada’s economy grew at a slightly slower than expected pace last quarter. No rate hike but a firm signal of a potential rate increase to 1.75% as soon as next month would tend to support Canada’s currency.

 

GBP

 

Sterling got off to a soggy start to the month as it backpedaled to 1 ½ week lows against the greenback. The ever-present uncertainties related to Brexit gnawed at the pound while it didn’t help that a pair of U.K. PMI surveys this week on manufacturing and construction underwhelmed, potentially heralding a similar outcome for the more important services sector index Wednesday. Nevertheless, forecasts call for the economy-driving services sector to grow at a slightly quicker rate of nearly 54 for August.

 

USD

 

The U.S. dollar got off to a quick start to the month with trade uncertainties running high, along with expectations for a solid showing from the U.S. economy this week. The ISM index of manufacturing growth comes out today, followed by the politically-sensitive trade deficit Wednesday and nonfarm payrolls Friday. Forecasts call for quicker hiring in August (190K vs July’s 157K), lower unemployment (3.8% vs 3.9%) and steady wage growth of 2.7%. Outcomes near or better than expected would help to cement a Fed rate hike to 2.25% from 2% on Sept. 26 and keep the door ajar to another increase by year-end, a scenario that could keep the greenback well-supported.

 

EUR

 

The euro hit 1 ½ week lows as risk-averse traders sought the U.S. dollar’s relative safety. Once again, markets are unsettled by the prospect of the U.S. ramping up tariffs on China whose economy has shown growing signs of weakness. Meanwhile, a report Monday on German manufacturing fared weaker than expected, an outcome that reinforced expectations for the ECB next week to leave area borrowing rates at rock bottom levels.

 

MXN

 

The peso crashed to two-month lows as risk-off markets, coupled with expectations of higher U.S. interest rates, took a toll on a range of emerging markets. U.S.-China trade tensions are in the spotlight with markets positioning for the former to slap more tariffs on the latter as soon as this week. Meanwhile, China’s economy has shown mounting signs of weakness which only adds to dollar-positive global uncertainties.

Aug. 31, 2018 (Western Union Business Solutions) – The U.S. dollar was mostly steady on the last day of the month as gains against the euro, sterling and Canadian dollar were offset by losses against the yen. An uptick in global trade anxiety has haven assets reigning. The latest signals from Washington hint at the U.S. upping tariffs on China as soon as next week. U.S.-Canada trade relations are also in focus ahead of a deadline today for the neighboring nations to make progress on a new Nafta pact. The euro softened after area inflation cooled and unemployment steadied above 8%, a still elevated level. August has proven a rollercoaster ride for the greenback which swung from one-year highs to one-month lows. The U.S. dollar index is on track for a narrow month-to-date gain.

 

MXN

 

Mexico’s peso, along with most emerging market currencies, surrendered more ground to the greenback on the month’s final day. The peso had rallied earlier this week on euphoria over the U.S. and Mexico agreeing in principle to a trade deal. The news hasn’t been enough to supplant worries about a U.S.-China-led global trade war, a scenario that’s spurring a flight to safety in the dollar and other havens.

 

CAD

 

Will the Canadian dollar finish the month with a gain against the greenback? The answer is shaping up to be a close call with the greenback enjoying a narrow MTD gain. Talks in Washington today between the U.S. and Canada hold the keys. Should officials reach a deal, it’s liable to spur a rally in the Canadian currency given that it sends three-quarters of its exports south of the border. No deal and the U.S. dollar is likely to finish August on top. Meanwhile, Canada’s economy this week stopped short of cementing a Bank of Canada rate hike from 1.50% on Sept. 5, as growth fell short of expectations and a gauge of wholesale inflation contracted in July. Key for the loonie from the BOC’s perspective will be whether Canada indeed holds fire on a rate hike next week and whether it tees one up for October.

 

USD

 

A rollercoaster August is on track for the greenback to cling to a gain. The buck raced to 14-month highs in mid-August only to see its upswing undercut after President Trump took a swipe at the Fed for raising rates. The buck hit one-month lows this week as fears of a global trade war diminished in the wake of the U.S. and Mexico brokering a deal in principle. Once back from the holiday weekend, attention will turn to the U.S. economy with the monthly jobs report on Sept. 7. Another month of strong job growth, low unemployment and higher wages would offer a recipe for a stronger dollar as it would keep the Fed on track for a late September rate hike.

 

EUR

 

A weaker euro Friday moved below one-month highs and was pacing a narrow month-to-date loss against the greenback. A still unsettled trade outlook between the U.S. and Europe, coupled with reminders of the still fragile shape of the bloc’s economy, put a headwind on the single currency. While the euro zone’s main gauge of inflation slowed a tick to 2% in August, a reading a bit above the ECB’s preference, less volatile core inflation remained anchored at a chronically low 1% which was consistent with the economy stuck in a low gear.

 

GBP

 

Sterling was poised for a bullish week but a bearish month in which it shed more than a penny against its U.S. rival. Sterling climbed out of a bearish range against the dollar this week after the EU’s lead Brexit negotiator sounded ready to offer Britain and unprecedented trade deal. The news, though, only provided a momentary boost to the pound as it didn’t erase the risk of Britain crashing out of the bloc without a trade agreement, a scenario that could subject the U.K. economy to significant downside risk.

 

Aug. 27, 2018 (Western Union Business Solutions) – The U.S. dollar started the week under pressure against the EUR with action subdued by a U.K. holiday. The dollar did not attract bids against big peers from Europe, Asia and Canada though it registered gains versus most emerging markets, led by a 3% jump versus the Turkish lira. Mexico’s peso was the exception is it rallied on signs that U.S. and Mexican authorities were making progress on updating Nafta. The buck is coming off a week of underperformance triggered in part by President Trump’s disagreement with the Fed raising interest rates. A signal last week by Fed Chairman Jerome Powell to gradually raise interest rates also undercut the buck by helping to stoke a stock rally that dampened demand for safer plays like the U.S. currency. The week ahead includes U.S. numbers on consumer confidence, revised second quarter growth and consumer spending.

 

GBP

 

Sterling got in the holiday spirit with a firm start to the week which allowed the U.K. unit to hold above recent 14-month lows. British markets are closed today for a bank holiday. A partial reversal in the dollar’s upswing has helped to alleviate downward pressure on the pound. Meanwhile, reports of tentative progress with Brexit negotiations between Britain and Brussels also translated into a firmer pound. A lack of U.K. data this week could see sterling look to Brexit developments and dollar movements for direction.

 

CAD

 

Canada’s dollar kept to a well-worn range against the greenback with holiday-subdued trading resulting in lackluster action. The market will use the coming week to fine tune expectations for the next increase in area borrowing rates. Thursday’s print of second quarter growth should help shed light on whether a rate hike from 1.50% comes as soon as September. Forecasts call a 3% annual rise in Q2 growth which would be the fastest pace in a year. The BOC next meets in 9 days on Sept. 5 with forecasts suggesting a less than 50% of a rate hike.

 

MXN

 

The peso powered to its strongest in two weeks on reports of the U.S. and Mexico making progress in updating Nafta. Recent uncertainty over the fate of Nafta has been a source of negativity toward the peso given that Mexico sends most of its exports north of the border. Upside for the peso was checked somewhat by emerging market weakness led by the Turkish currency’s renewed slide after markets there returned from an extended holiday.

 

USD

 

The dollar was mostly steady after a week of underperformance stemming from President Trump lambasting the Fed for raising rates while the central bank indicated that future rate increases would likely be gradual. Mr. Powell’s keynote speech in Jackson Hole, Wyo. last week was interpreted a dovish, noting a lid on inflation which effectively put one on the dollar. Thursday could prove the deceive day of the week for the dollar with data on personal income and spending and the Fed’s main gauge of inflation. Core inflation is forecast to tick up to 2% in July. Barring an upside surprise, the data may not be enough to excite dollar bulls given that the Fed has signaled a tolerance of allowing inflation to exceed its goal after missing it for many years.

 

EUR

 

The euro rose to its highest in 3 weeks against the greenback, buoyed by better than expected data on German business optimism. The Ifo survey topped forecasts with a 103.8 reading in August which offered evidence of modestly improved U.S.-German trade relations easing a headwind on the bloc’s biggest economy. Friday looms as the week’s most important day for the euro zone when it publishes central bank-impacting numbers on inflation and unemployment.