Global Themes

The U.S. dollar ticked higher and stocks slid as global trade tensions flared anew. The euro, yen and sterling were as much as a third of a percent lower, while currencies with close ties to global growth, like the Aussie, kiwi and Canadian dollars slid as much as a percent. Emerging markets endured some of the heaviest selling with the South African rand down 1.5%. After shifting to the backburner in recent days, trade tensions reclaimed center stage on reports that the U.S. was mulling more tariffs on Chinese goods to the tune of $200 billion. Among major currencies, the dollar has tended to fare the best when trade troubles mount on the view that the U.S. economy is in a better position than its counterparts to weather a potential trade war. Canada’s dollar hit a one-week low ahead of an expected rate hike today by the Bank of Canada. 


Lower oil markets and caution ahead of a Bank of Canada interest rate decision today weighed on the loonie which slipped to its lowest level in more than a week. Many expect the BOC to raise its main rate today to 1.50% from 1.25% with the economy perceived to be on a healthier footing. But with trade tensions running high, it wouldn’t come as a total surprise if the BOC should get cold feet and leave policy unchanged. And while Canada is likely to raise rates today, markets are more concerned about the outlook for monetary policy. A rate hike today coupled with a cautious message that plays up trade uncertainty and plays down further rate increases in the months ahead could weigh anew on the Canadian currency.  


The U.K. pound was modestly weaker as an uptick in global trade uncertainty spurred buying of the U.S. dollar as a safe harbor. Sterling has served as a barometer of market confidence in British Prime Minister Theresa May surviving a political crisis that ensued after two prominent members of her Cabinet, including Foreign Secretary Boris Johnson, resigned in opposition over her desire for a softer Brexit in which the nation seeks close trade ties to the EU after its separation early next year.


The euro lost ground as trade troubles lurked, a vulnerability for Europe’s economy that relies on exports as a chief growth engine. The euro has wavered since flirting with one-month highs earlier this week after data showing the weakest German investor optimism in six years in July suggested that economic weakness may have spilled over to the second half of the year, a scenario that could keep the ECB on a decidedly cautious path to rolling back stimulus.

Deliver the Daily Currency Market Analysis to my Inbox

Published five days a week, this newsletter provides day-to-day trends and activities affecting the market in easy-to-understand snapshots.