Global Market Snapshot 12th August 2024

The foreign exchange market exhibited significant volatility this week, with the performance of the US dollar, Canadian dollar, and Japanese yen being particularly noteworthy. Influenced by multiple economic data releases and expectations surrounding monetary policy, the movements of these three currencies reflect the market’s complex sentiments and uncertainty about the future.

US Dollar: A Tug of War Between Rate Cut Expectations and Economic Data

The US dollar experienced significant volatility this week, ultimately ending on a downward trend. The July non-farm payroll data came in below expectations, fuelling concerns about a potential economic recession, while further weakness in the manufacturing sector reinforced this outlook. Although the likelihood of an emergency rate cut by the Federal Reserve remains very low, market expectations of such a move drove the dollar to multi-month lows. However, a decrease in initial jobless claims helped ease some concerns about the labour market, providing some support for the dollar. Comments from Federal Reserve officials also reflected a cautiously optimistic stance on the current market conditions.

USDCAD was broadly flat at 1.3729. Canada’s employment fell 2,800 in July, compared with an estimated decline of 5,000, while jobless rate was unchanged at 6.4% as expected. Despite the unexpected decline in employment in Canada for July, the Canadian dollar posted its largest weekly gain in eight months. According to data from Statistics Canada, the unemployment rate remained stable, and wage growth slowed but was still faster than expected. This suggests that the Canadian labour market is likely to gradually ease, indicating that the economy could achieve a soft landing.

USDJPY lost 64 pips (-0.43%) to 146.64. The Japanese yen experienced its first weekly decline in six weeks, despite a sharp rise earlier in the week due to weak US economic indicators. The unexpected rate hike by the Bank of Japan led to a surge in short-covering trades for the yen. However, as the market adjusted its expectations regarding Federal Reserve rate cuts, the safe-haven demand for the yen weakened.

EUR and GBP showed little change compared to a week ago. Despite the economic challenges faced by the eurozone, both currencies remained relatively stable in the short term.

BTC Bitcoin was down 3.53% to $58,533