Global Themes

A broadly weaker U.S. dollar crashed to its lowest in weeks on the notion that a weaker world economy and America’s low rate of inflation had erased a rate hike the Federal Reserve penciled in for this year. The buck was on track to spend a second straight week in the red, having hit three-week lows against the euro and its weakest in seven and 10 weeks against peers from Australia and Canada, respectively. The dollar has entered a period of higher uncertainty over the short run though with a weaker bias. It’s too soon to entirely write-off chances of a Fed rate hike this year with lots of data and time before policymakers’ final meeting of the year in December. Still, until U.S. data depict a stronger U.S. economic backbone the dollar would be prone to further slippage. The loonie’s burst to late July highs will be tested today by Canada’s monthly jobs report, forecast to show a third straight month of gains.

AUD

The Aussie buck soared to seven-week highs on the view that interest rate differentials would work in its favor for longer. It also helped that most global stocks soared, whetting market appetite for high-yielders like the Aussie, the developed world’s second-juiciest base rate at 2.0%. Gains for commodity currencies may have limited upside with China not out of the woods while festering global uncertainty also doesn’t bode well for sustainable gains beyond the near term.

EUR

The dollar’s loss of popularity has been a boon for the euro, allowing it to sweep its economic vulnerabilities of low inflation and high unemployment under the rug for now. Consequently, the euro notched three-week peaks against the dollar, potentially putting in play levels near or above $1.15 in coming days.

CAD

The loonie could struggle to hang on to late July highs, following mixed news on Canadian hiring. Canada netted 12,100 jobs in September, topping forecasts. Unemployment rose by a tick to 7.1%, a February 2014 high, as more peopled entered the workforce. The market won’t like how all of the job creation came from part-time hires. The report leaves the loonie’s gains ripe for profittaking heading into the long holiday weekend.

USD

U.S. import prices fell 0.1% in September; a reminder of stubbornly low inflation which is top of mind at the moment and a factor behind the Fed’s perceived reticence on raising rates. But dollar bulls will like how the pace of decline in import prices slowed. U.S. data in the week ahead include retail sales Wednesday, inflation Thursday and factory output Friday.

GBP

The longer it takes the Fed to raise rates, the longer it could take Britain. That notion caused gains for the pound to lag rivals like the euro, Aussie and loonie, mustering little more than a two-week peak. Positive traction for the pound was also restrained by news of a bigger than expected U.K. trade deficit of £11.1 billion in August, news that reinforced expectations of slower British growth last quarter.