Yesterday was a very quiet Monday and what looks the same again today has seen the dollar soften slightly across the board. While medium term forecasts suggest that the dollar can stay bid for the rest of the year as the Fed takes the funds rate to 3.25/3.50%, dollar stability could see G20 FX play catchup in the short term – aka mild appreciation vs. the greenback. For today, expect another range-bound day as the market awaits the US July CPI release tomorrow – a release expected to cement expectations that the Fed Funds rate will be taken to the 3.25/3.50% area by year-end.
Canada's economic calendar is very light this week. After approaching 1.30 before the weekend in response to the diverging job reports, the greenback fell to about 1.2840 yesterday. The USD/CAD has not been above 1.2875 today. Nearby support may be near 1.2820. The USD/CAD trend will hinge more on external issues—risk appetite, volatility etc.—in the short run as the only data release of note in Canada is CPI data on the 16th.
EUR/USD remains listless in the middle of a 1.0100-1.0300 range. The European data calendar is exceptionally light and the pair will instead be driven by geopolitical factors and US data/Fed speak. Our baseline for the remainder of this year is EUR/USD continuing to trade down near the 1.00/1.02 area. Italian politics will also prove a headwind into the September elections.
GBP/USD continues to trade sub-1.22 to start the trading day. We had felt that this might prove the top of a near-term trading range – despite the Bank of England's bleak prognosis last week. In our mind, there still does not seem a compelling case for GBP/USD to trade substantially higher in the short term.
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