Global Themes

Cooler market sentiment prevailed Thursday, putting the U.S. dollar in better spirits and allowing it to stabilize above one-month lows. The dollar has been shoved around this week after a shock move by China to depreciate its currency fanned fears about global growth. Markets saw the rise in global uncertainty as potentially standing in the way of the Federal Reserve raising interest rates. However, market confidence improved today as China’s currency fell by a smaller degree, about 0.5%, while the market’s gaze shifted back on the world’s biggest economy with data due today on the all-important U.S. consumer. Retail sales are expected to bounce back in after falling the month before. Another U.S. survey is forecast to show weekly jobless claims hovered near historic lows. Ultimately, the shape of the U.S. economy would determine when the Fed moves on rates so constructive data today would be supportive of the dollar.

USD

General signs of U.S. economic strength helped brighten the dollar’s spirits and hoist it above one-month lows. Helping to keep the door propped open to a Fed rate hike this year, retail sales topped forecasts with a 0.6% rise in July. Weekly jobless claimed unexpectedly increased by 5,000 to 274,000. But they’ve kept below 300,000 for 23 weeks in a row, which could embolden the Fed to soon raise interest rates.

GBP

Sterling was on a firmer footing, rebounding from onemonth lows against the euro, supported by encouraging news on Britain’s housing market. A survey of home prices fared better than expected, printing at the highest in a year. Sterling’s rise will be tested by U.S. data over the balance of the week. Good news on the U.S. economy would leave the pound vulnerable as it would bolster hope in a Fed rate hike.

CAD

Up one day and down the next. That’s how the loonie has fared this week. If that pattern remains in place the loonie could be in store for another drubbing today. The pieces were in place of a down day for the Canadian unit with oil off to a weak start and mixed but generally positive U.S. data supportive of a September move by the Fed.

AUD

The Aussie dollar hovered close to this week’s fresh sixyear lows against its U.S. counterpart, weighed down by festering uncertainty related to China. The Aussie’s monthslong slide accelerated this week after China devaluated its currency, which fanned worries that the pace of growth in the world’s No. 2 economy may be falling faster. Having fallen more than 20% in a little over a year, could a bottom soon be in sight for the Aussie?

EUR

The euro squandered a one-month high against the dollar as the market spotlight shifted from the world’s No. 2 economy and back to No. 1. Key U.S. data today on the consumer and job market could rejuvenate hope for the Fed to bump interest rates higher this year, an outcome that would underpin the dollar. Sentiment also cooled toward the euro on caution ahead of euro zone second quarter growth data on Friday, a critical risk event. The euro should stick to its wavering ways as still elevated worries about China could lead many to unload CNY and buy EUR.