Pillole giornaliere

A mostly buoyant U.S. dollar flirted with two-week highs against the euro and a currency basket. The dollar struggled against the safer yen with market eyes fixated on developments in the world’s two largest economies. Uncertainty remains over when the Federal Reserve would boost U.S. interest rates which has restrained the dollar’s movements. Still, after a round of hawkish remarks from Fed members since the weekend, many are giving the central bank the benefit of the doubt that rates could rise before the end of the year, buoying the dollar. Adding to the skittish market backdrop, China on Wednesday is due to release critical manufacturing data. Slight stabilization is on the cards but any outcome that should stop short of that would risk intensifying worries about the health of the world’s second biggest economy. Canada’s dollar hit a one-week low, keeping the loonie near last month’s 11-year trough.

USD

The dollar recovered from its Fed-induced hangover of last week thanks to a chorus of central bank officials playing up the possibility of a U.S. rate rise before the end of the year. And regardless of whether the Fed raises rates in late 2015 or early 2016, markets expect central banks in Japan and the euro zone to beef up their low rate policies to keep their tentative recoveries on track. Next to fuel the U.S. rate debate will be data Thursday on durable goods and new home sales, and a public speaking event later that day (at 5 p.m. ET) by Fed Chair Janet Yellen.

GBP

Fresh evidence of a moderating U.K. economy weighed on the pound and knocked it to its lowest level in nearly a week against the dollar. A gauge of British factory orders fell for the 5th time in as many months in September, keeping the Bank of England on pace to lag behind the U.S. Fed in raising interest rates, a positive for the dollar and a negative for the pound. 

CAD

A softer loonie held less than a cent away from last month’s 11-year low against the greenback. The usual trio of factors was in force weighing on the loonie: Uncertainty over China, weaker oil prices and expectations the Fed would boost interest rates in the months ahead. The loonie will find a catalyst Wednesday in data on Canadian retail sales which are forecast to rise for the 3rd time in as many months in July.

EUR

The euro neared a two-week low against the dollar, falling three cents from Friday’s 3-week high. Expectations that the months ahead augur more monetary stimulus from the euro zone and less from the U.S. have revived a chief source of negativity for the euro. Although the longer run outlook remains bearish for the euro on the view that the ECB might have to step up monetary stimulus to keep the bloc’s recovery on track, falls in the euro could prove somewhat limited over the short-run if risk-averse markets tempt people to unwind euro-funded carry trades on higher-yielding currencies.