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USD

Currencies Lose Momentum as Caution Sets In

The euro, pound, and yen are essentially flat against the dollar this morning as month end flows begin to dominate the foreign exchange landscape, with market participants generally inclined to cut leverage ahead of what could be an extremely dangerous September. Data releases continue to paint a mixed picture of fundamental developments in the US economy. Yesterday’s July durable goods report beat expectations on the headline level, but proved disappointing on closer examination. Overall orders climbed 9.9 percent from the prior month, but this was largely due to a jump in aircraft orders, which rose almost $23.4 billion after falling...

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Holding pattern

• Consolidation. Partial reversal in some markets. US equities slip back while yields & the USD tick up. AUD eased but still near the top of its range.• AU CPI. Monthly inflation due tomorrow. A lot of uncertainty due to electricity subsidies. A large drop in the annual headline rate could weigh on the AUD.• Fed pricing. Markets grappling with whether the US Fed will cut rates by 25bps or 50bps at upcoming meetings. History & the data points to 25bp steps. After the outsized moves last week it isn’t surprising to see that some markets cooled their jets a...

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Dollar Sends Out-of-Office Autoreply

The almighty greenback is making a lacklustre attempt at climbing off the mat after suffering the worst selloff in a year during Friday’s session, with rising geopolitical tensions doing little to reverse its losses. On a trade-weighted basis, the dollar is up incrementally this morning, but has fallen roughly 3 percent this month, pacing declines in Treasury yields even after Israeli airstrikes on Hezbollah targets in Lebanon generated a mild safe haven bid over the weekend. Oil prices are modestly higher, equity futures are seeing cautious inflows, and the pound, euro, and yen are turning in mixed performances amid holiday-thinned...

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Don’t fight the Fed

Don’t fight the US Federal Reserve. The old market saying is back with a vengeance following Chair Powell’s explicit ‘dovish’ pivot in his latest speech at 2024 Jackson Hole Symposium. After being laser focused on upside inflation worries over the past few years the pendulum has clearly swung to the other part of the Fed’s ‘dual mandate’ with downside risks to employment now front of mind. Importantly, in the words of Chair Powell “the time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data,...

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The time has come

• Dovish Powell. US Fed Chair gave strong signals the start of the rate cutting cycle is approaching. Focus now on downside labour market risks.• Market jolt. Equities & commodities jumped, bond yields & the USD declined. AUD at the top of its 7-month range. EUR highest since mid-2023.• Event radar. Locally, July CPI (Weds), CAPEX (Thurs), & retail sales (Fri) are due. Offshore, Eurozone inflation & US PCE Deflator (Fri) are released. Markets ended last week on a positive note with the more dovish than anticipated message from US Fed Chair Powell boosting risk sentiment (see below). US equities...

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