Global Themes

Growing doubts in when the Federal Reserve would boost interest rates have turned America’s dollar into a markedly less formidable currency. The dollar has seen its strength increasing sapped by a parade of downbeat data on the U.S. and world economies. Things got off to a poor start for the buck earlier this month when America’s job market showed a marked slowdown in hiring in September. With the economy dispensing fewer paychecks it’s taken a toll on consumers who barely spent last month. Much of the dollar’s year-to-date strength has been neutralized but companies can still lock-in profits at current levels which may not last. At the outset of Thursday trade the dollar had steadied after a ferocious rout the previous day knocked it to late August lows against the euro and yen. Canada’s loonie held strong at 11-week highs. The dollar retained a weak bias ahead of U.S. data today on inflation, manufacturing and the job market.

EUR

With no one talking about the divergent outlooks for monetary policy in Europe compared to the U.S., the euro has managed to appreciate to seven-week highs against the dollar. A risk to sustainable gains for the euro would be any push back from the European Central Bank (ECB) over the euro’s nearly 10 percent rise from 12-year lows hit in March. That’s what happened today as the euro surrendered a gain after a senior ECB official said it was “obvious” the bank should increase stimulus, partly because euro appreciation risks exacerbating the bloc’s chronically low inflation.

GBP

GBP buyers want to take heed and take some cover while the dollar still retains a gain on the year against the pound. The pound’s more than two-cent appreciation Wednesday was good for its best single day performance in seven months. Sterling shot higher after U.S. consumer spending slowed and U.K. unemployment hit a seven-year low of 5.4 percent.

AUD

Rallying global stocks and markets’ renewed appetite for yield helped the Aussie dollar weather mixed local jobs data. Australia unexpectedly shed 5,100 workers last month though unemployment steadied at 6.2 percent versus forecasts of an increase. The data was inconclusive on the Reserve Bank of Australia (RBA) rate outlook, with the Aussie line to benefit from any further pullback in the dollar.

CAD

Make that an 11-week peak for the loonie versus the crestfallen greenback. Two weeks ago the loonie was pinned at an 11-year bottom against its U.S. peer. The turning of the tables has opened a window of opportunity and savings for USD buyers while it’s setting off the alarms and reducing profits for CAD buyers. A weak loonie is positive for Canada’s export-driven economy. The Bank of Canada looms Oct. 21. Will it push back against the loonie’s rise?

USD

The best jobless claims in decades helped the dollar recover from a brutal beating the day before. The weekly tally fell 7,000 to 255,000 – the fewest since late 1973. Consumer inflation slipped to an annual rate of zero which wasn’t as bad as forecasts of a subzero reading. The pace of contraction in the Empire State index slowed to -11.4 for October. The constructive tone of the data can help the dollar catch some breath. Sentiment shouldn’t get a meaningful lift until the U.S. and world economies can string together signs of stabilization.