Daily Currency Update

USD - US Dollar

The recent USD rally seems to have paused after the Jackson Hole central bank symposium. Although recent Fed talks showed a data-dependent approach without urgency to tighten policy, markets still expect limited Fed action in September, thinking the tightening phase is near its end. China's efforts to stabilize the CNH might also reduce the appeal of the safe-haven USD. Yet, it's early to be pessimistic about the USD. Positive US data this week could raise expectations of a hawkish Fed stance, boosting USD. Today's focus is on the August Consumer Confidence index and July JOLTS data, which, if positive, can emphasize the US labor market's role in supporting consumer confidence.

CAD - Canadian Dollar 

Yesterday, the US dollar traded between CAD1.3570 and CAD1.3610, maintaining its range from the previous weekend. The peak reached last week was around CAD1.3640. Technically, a drop below CAD1.3560 would be significant. The CAD's movement is expected to hinge on upcoming data. Attention in Canada turns to the Q2 GDP report due this Friday. Analysts anticipate a deceleration in economic growth, which might prompt the Bank of Canada (BoC) to reconsider its interest rate hikes, even with recent inflation spikes. The BoC's next decision is expected on September 6. Observe the USD/CAD trends.

EUR - Euro 

As the ECB's September policy meeting nears, hawkish members advocate for further tightening, likely driven by market expectations for a potential ECB hike. The implied probability for a September action remains under 50%. While President Christine Lagarde maintained a hawkish stance in her recent Jackson Hole speech, overlooking signs of the eurozone's slowing economy, markets are now closely following the ECB's data-dependent approach. The upcoming inflation figures will be crucial in determining expectations for a September hike.

GBP - British Pound

The pound began the week with a slight gain, bolstered in part by the hawkish remarks from Bank of England Deputy Governor Ben Broadbent at Jackson Hole. Broadbent emphasized that inflation might not decelerate as rapidly as it surfaced and that the monetary policy should remain restrictive for an extended period. Moreover, the pound is benefiting from a cautious risk-on and dollar-off sentiment as London markets resume following a UK national holiday. Given a light UK calendar this week, the GBP is expected to be influenced mainly by external events.