Daily Currency Update
Demand for the US dollar climbed on Monday as recession fears continued to drive market direction. Last week, non-farm payroll data was positive, increasing by 372,000 jobs and ahead of expectations, indicating the job market is still strong despite fears of a recession into 2023. The headline unemployment rate was also steady at 3.6% for the fourth straight month in a row. Wage growth continued to grow strongly at 5.1% for average hourly pay, giving more support for the US Federal Reserve to hike interest rates at a more aggressive pace. Some analysts thing a 50 basis point rate hike is guaranteed at the next Fed meeting on July 27, priced in at 93% in the latest reading on the CME Fedwatch Tool. The US Dollar Index touched 108.00 at the time of writing.
Key Movers
EURUSD continued to slide on Monday, flirting with parity during the midday US trading session. The euro ended last week as the worst performing currency globally on increasing worries of a deeper and longer recession in the Eurozone. The sell-off of the euro also dragged down the Swiss Franc, which ended the week as the second worst performing currency. The euro’s broad-based decline is marching towards parity against the US dollar. This was triggered by the gas and energy crisis and the prolonged Russian invasion of Ukraine. Europe is now facing the risk of a worse recession than other major economies. The gloomy outlook is potentially tying up the European Central Banks’s hands on monetary policy normalization to combat inflation. The ECB is expected to hike interest rates by 25 basis points this month. EURUSD was trading at 1.0067 at the time of writing.
Expected Ranges
- EUR/USD: 1.0056 - 1.0182 ▲
- GBP/USD: 1.1873 - 1.2035 ▲
- AUD/USD: 0.672 - 0.6853 ▲
- USD/CAD: 1.2945 - 1.3048 ▲