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Currency Market Analysis

Jun 22, 2022 | Currency Market Analysis

Global Themes

A sharpened focus on the Federal Reserve helped the U.S. dollar start the day with broad gains. The dollar edge up against the euro and sterling and fared its best against commodity currencies like the Aussie, kiwi, and Canadian dollars as oil extended a recent descent. Versus the beleaguered Japanese yen, the greenback clocked a new 24-year peak. Fed Chair Jerome Powell will command the spotlight today and tomorrow as he delivers semi-annual testimony to Congress on the state of all things U.S. monetary policy. Mr. Powell addresses the Senate Banking Committee today and the House Financial Services Committee Thursday. Remarks that sound hawkish on the interest rate outlook to help it bring down the highest inflation in decades could weigh on stocks and buoy safe havens like the greenback.

EUR

Euro cuts weekly gain

The euro was little changed Wednesday with a softer bias as weaker global stocks signaled risk aversion and a preference for safety in the greenback. While toward the lower end of its range, the euro has steadied off its lows thanks to the ECB telegraphing interest rate liftoff would start in July and continue over coming months to help it fasten a lid on record high inflation.

GBP

Who has the highest inflation in the G7?

Sterling weakened after data showed that Britain was home to the highest inflation among G7 nations, a dubious distinction that aggravated concerns about a slowing British economy. As expected, UK consumer prices rose at an annual rate of 9.1% in May, the highest in 40 years, from 9.0% in April. The worry is that inflation is likely to get worse before it gets better with the Bank of England forecasting prices above 11% by October. High inflation and rising interest rates add to an anemic outlook for growth.

CAD

Canadian inflation hits 39-year high of 7.7%

Canadian consumer prices rose to new highs of 7.7% but the loonie teetered near recent lows as global growth concerns remained prevalent. While the highest inflation since January 1983 keeps the Bank of Canada on track for a rate hike as large as 75 basis points next month, many remain on edge that a synchronized spike in lending rates could deal a significant blow to the world economy, a theme pressuring commodity currencies.


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