Firm inflation and low oil demand challenges Loonie

Key Movers

The US dollar, after starting the week on a bullish note, lost some strength today. The greenback has largely benefitted from positive retail sales data for July which was released yesterday. The Federal Reserve is set to release the Industrial Production figures and publish the minutes of the July policy meeting later today. The US Census Bureau revealed today that Housing Starts rose 3.9% monthly in July, following the 11.7% drop (revised from -8%) in June. This reading came in better than the market anticipation for a growth of 2.7%. In the same period, Building Permits, which declined 3.7% in June, increased 0.1%.

The euro works to keep itself steady against the USD, leading to a recovery in EUR/USD pair above the 1.0930 level. This recovery can be attributed to slight renewed selling pressure on the greenback, causing a slip towards the 103.00 mark. Eurozone markets hold expectations that the Fed may maintain its current interest rates for the rest of the year. On the other hand, the European Central Bank (ECB) is dealing with internal disagreements regarding the continuation of its tightening cycle mostly after the month of September.

The GBP is strengthening, pushed by persistently high core inflation data. Strong wage growth keeps consumer spending intact and core price pressure near its a peak of 7.1%. The United Kingdom’s stubborn core Consumer Price Index (CPI) is driving the Bank of England (BoE) to consider additional rate hikes. The BoE has already raised interest rates to 5.25%.