- US Dollar looks to August payrolls data to confirm Fed outlook shift
- Euro unlikely to find lasting direction cues in German, Eurozone CPI
- OPEC output deal hopes may muddy impact of Canadian GDP drop
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The US Dollar soared against its major counterparts as traders upgraded 2016 rate hike probabilities following hawkish comments from Fed Chair Janet Yellen, who said “the case for an increase in the federal funds rate has strengthened in recent months”. Augusts' Employment data now lines up as an opportunity to confirm or countervail up-shift in the expected tightening timeline.
The Euro is unlikely to find lasting direction cues as preliminary readings for German and Eurozone CPI cross the wires. Modest improvement is expected in the currency bloc's largest economy and region-wide. The ECB's firm dovish bias means such outcomes are not especially meaningful however in so much as they will not materially alter near-term policy dynamics.
Canadian GDP figures are expected to show the economy contracted in the second quarter. While the outcome seems to bode ill for BOC policy prospects and thereby the currency, the influence of oil prices may obscure the situation. Hopes for an accord on a crude output freeze at an informal OPEC meeting next month have helped limit Canadian Dollar losses and may continue to do so in the near term, undercutting the influence of domestic factors.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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